Auction Results: Weekly market wrap with Sam DodimeadBack
Canberra’s auction results are a key insight into buyer confidence. Greater volumes of properties were taken to auction as February progressed, and the auction clearance rate remained strong. Principal and owner of Mortgage Choice Manuka, Matthew Hayes, experienced significant growth in borrower demand and the volume of loans his business has written during the first two months of this year.
“Since January we’ve written $20 million in home loans compared to $7 million this time last year,” he said.
A property purchase marks the final step in a process often starting weeks or months prior. Mortgage brokers are at the forefront of where future buyer demand is likely to come from, as would-be purchasers seek to understand their financial capacity prior to purchasing.
According to Hayes, “the main thing we’re seeing is demand for first home buyer product. Every first home buyer we’re working with is buying prior to their pre-approval lapsing. People looking to upsize are also active because they believe they can get a good price for their existing home”.
The sense of urgency from borrowers described by Hayes is consistent with CoreLogic Home Property Value Index results for February. CoreLogic found both house and unit values increased during February in Canberra. House values increased by 0.84% and are 5.01% higher than this time last year. Unit values have increased for five consecutive months, increasing by 0.48% in February to be 0.89% higher than this time last year.
These results demonstrate strong borrower demand is driving the increase in property values. The historically low interest rates and lending policy changes during 2019 are helping borrowers be in a far superior position to the same time last year.
“Current interest rates and credit policy changes mean buyers can borrow up to $100,000 more than they could 12 months ago,” Hayes said.
Interest rate cuts allow borrowers to take on a higher loan value without increasing repayments. Australian Bureau of Statistics figures show residents of the ACT have the highest average weekly earnings nationally. This maintains housing affordability and allows people purchasing property to secure their ideal home.
“Borrowers are using current conditions to get what they need, and they’re willing to pay that bit extra to get what they want,” said Hayes.
CoreLogic’s head of research, Tim Lawless, explained the recent run of transactions in Canberra exceeding $3 million: “structural factors may also be at play, including a rise in borrowing capacity following changes to serviceability assessment from APRA in July 2019, and the dominance of owner occupier buyers (rather than investors) through the recovery phase to date”.
“With lenders favouring ‘high quality’ borrowers, buyers with a large deposit and low level of debt relative to their incomes are likely to be those who receive the lowest mortgage rates – another factor that could be supporting demand at the more expensive end of the market.”
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