Some property markets booming, others going backwards

Sydney, Melbourne and Hobart have recorded double-digit increases in property prices over the past year.

The median dwelling price in Sydney surged 16.0 per cent in the 12 months to 30 April 2017, according to CoreLogic.

Melbourne’s median price jumped 15.3 per cent, while Hobart’s jumped 13.6 per cent.

Not all markets are booming

However, the Perth and Darwin property markets are continuing to go backwards.

Perth’s median price has now fallen 8.5 per cent since February 2015, while Darwin’s median has dropped 10.8 per cent in the same period.

It shows that talk of a ‘housing boom’ in Australia is misguided, because while Sydney and Melbourne are booming, other parts of the country are experiencing very different conditions.

Canberra recorded strong growth over the past year, with its median price increasing 8.4 per cent.

However, in real terms, the Adelaide and Brisbane markets stagnated.

Adelaide grew 2.2 per cent and Brisbane 2.1 per cent – in line with Australia’s inflation rate, which is 2.1 per cent.

Too early to call time on Sydney

Sydney’s median price may have boomed over the past year, but it remained unchanged in April.

However, CoreLogic head of research Tim Lawless said it was too early to say Sydney had peaked, especially as April included Easter, school holidays and a long weekend.

“The softer results should also be viewed against a backdrop of an ever-evolving regulatory landscape, which is firmly aimed at slowing investment and interest-only mortgage lending,” he said.

“Testament to this is mortgage rates which have been edging higher, particularly for investors and interest-only loans, as well as rental yields which have been hovering around record lows. The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months.

“In a city like Sydney, where more than 50 per cent of new mortgage demand has been from investors, a tighter lending environment for investment purposes has the potential to impact housing demand more than other cities.”

How rising prices could help your debt position

Borrowers who live in growing property markets could take advantage by refinancing their mortgage and simultaneously revaluing their home.

Why? It could give borrowers an improved loan-to-valuation ratio (LVR) and increased equity.

Imagine a home owner borrowed $600,000 to buy a $750,000 property – that would give them an LVR of 80 per cent. Imagine, three years later, the debt had fallen to $550,000 and the property’s value had risen to $850,000 – that would give them a new LVR of 65 per cent.

If the home owner refinanced, the new lender might reward them for their improved LVR by giving them a cheaper rate.

The new lender might also allow them to extend their LVR back to 80 per cent, which would allow them to increase their mortgage from $550,000 to $680,000.

That extra $130,000 could be used to pay for any number of things – a deposit on another property, renovations, school fees, a car or even a holiday.

RateCity is making it easier to refinance with its Switch & Save Sale, which is giving borrowers the chance to refinance to a cheaper rate.

If you have a mortgage with ANZ, Commonwealth Bank, NAB or Westpac, you could save up to $39,000 over 15 years by refinancing during the Switch & Save Sale.

RateCity arrived at that figure after calculating how much borrowers would save if they switched from an average-sized mortgage at the average discounted variable rate offered by one of the big four banks to the lowest variable rate in the Switch & Save Sale.

RateCity then factored in the discharge fees, application fees and ongoing fees to work out the savings over a 15-year loan term.

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