Regional VIC

The Smartline Report – March Edition

The month in review: Regional VIC

By Herron Todd White
March 2015

The latest cut in interest rates from the RBA will have a positive effect on the Ballarat residential market, mainly in the sub $400,000 section. Participants in this section of the market historically have the highest loan to value ratio and as such will be most acutely affected by a change in the cost of their mortgage. Less affected sections of the market are the prestige residential and rural residential areas, due to their generally lesser loan to value ratio and fewer market participants.

The rate cut will also have a positive influence on the investor market as decreased costs of capital transfer into larger returns without increases in rents.

Gippsland and Latrobe Valley
It is still too early to see if the recent interest rate cut will affect the Latrobe and Wellington shires. There has been an increase in sales activity In the past three to six months from Sale through to Traralgon and into Warragul, however prices have remained similar to that of 2012 levels.

Rents remain strong throughout Latrobe Valley while rents have increased in the Sale and Maffra area due to increased employment and higher demand.

Rate cuts in recent years have not really had a major impact on these markets. However discussions with
local real estate agents indicate that these low rate cuts may see a stimulus in the market. It is definitely a wait and see approach.

Baw Baw Shire
The rental market has been stable with average rents around $280 per week for older stock and $300 to $350 per week for newer dwellings depending on size and location. The interest rate cut is not expected to have much impact on the rental rates around Baw Baw.

First home buyers are likely to be lured into a mortgage with lower repayments. It has been mentioned recently in the media that some lenders have returned to 95% loans, which can give those starting out a greater chance to get that first property with a lower deposit.

An additional rate cut is expected in 2015 or 2016 which should make the market slightly more attractive to upgraders as well.

In saying that, property prices are expected to remain stable with low percentage increases over the coming 12 months.

East Gippsland
East Gippsland markets experienced an increase in sales activity in the latter part of 2014 and continuing into 2015. Prices are remaining flat in generally well traded areas and properties are selling in areas which have been subdued over the previous few years where vendors are meeting the market. Buyers are still getting good value for money.

The low interest rate environment may be helping sales levels. The market has stabilised and early signs of recovery are evident however prices have not yet responded.

A number of recent residential subdivisions has seen increased house and land packages being acquired, such as Shannon Waters Estate on the western fringe of Bairnsdale. Sales within these estates are expected to remain steady throughout 2015 as building companies offer competitive house and land packages.

As a result of the latest interest rate cuts by the RBA, the Warrnambool property market should respond positively, especially in the mid-range (under $350,000) sector of the market which accounts for the majority of current transactions. This sector comprises investors who will take advantage of the lower interest rates on offer as well as first home owners and young families who generally have a higher loan to value ratio. Top end residential and rural lifestyle properties will be the least affected sector mainly due to the security of most purchasers.

When looking at general market levels of demand and supply, values and vacancy in Horsham and the Wimmera, the recent interest rate cut is likely to go relatively unnoticed. But under the surface the recently subdued market was displaying signs of softening with a reduction in sales numbers and very little demand for properties over $500,000.

The recent interest rate cut is likely to improve demand from those prospective buyers who have been holding off which in turn is likely to steady the demand and number of market transactions at the current rate. The number of transactions of residential homes is likely to remain low in coming months with limited price movement. The first home buyer market in the $200,000 to $300,000 bracket is likely to be the strongest performing market in coming months with some renewed interest from investors as a result of the rate cut.

The residential market in Mildura started to move up in early 2014 after a prolonged period of stable prices. This upswing is attributed to improved confidence in the economy combined with a low interest rate environment. The recent announcement of a further interest rate cut is likely to maintain the existing momentum.

For owner-occupiers the impact of the rate cut is considered minor. The average home loan required to purchase a dwelling in Mildura is lower than in capital cities and while buyers will no doubt appreciate the peace of mind gained from the cut, the financial impact of a 0.25% variation is relatively minor.

The interest rate cut may however provide additional impetus to investors, particularly those who become disenfranchised with the low interest rates available for term deposits. Returns from residential investment properties compare favourably with those available from more passive investments and it is considered likely that some new investors could enter the market.

Homes in the $225,000 to $350,000 range and units in the $150,000 to $225,000 range are considered to provide the best combination of rental return and ease of management and we would see these segments as being the most likely to come under investor attention.

Homes in the over $350,000 bracket are more likely to appeal to owner occupiers and are considered less likely to be impacted by the move in interest rates.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325


Share on:

DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.