So what is normal?

BY GARETH KENT
Director, Preston Rowe Patterson

For home buyers.

It is all about affordability and an aspirational, but achievable lifestyle.

Affordability?

Rising interest rates have impacted affordability, but let’s put that in perspective. If you take a long-term view, in the last 20 years variable mortgage rates have averaged about 5.60%. In 1974 rates exceeded 10.00% and stayed there till 1995. In the next 27 years they have then averaged 5.60%. We lucky souls have just lived through the once-in-a-lifetime, lowest interest rates ever recorded, some as low as 2.20%. The current medium variable rate appears to be set at about 4.10%. We expect it to climb further, but anything sub 5.60% is a good result.

Changing lifestyle expectations!

COVID has completely changed our expectations about how we work and live.

A little recent example: I was attending a meeting at the fabulous Collins Square building in Docklands. It was a Friday, and it was a ghost town! I noticed that nobody was wearing a suit, let alone a tie; and I even got a park that only cost me $14 per hour! Feeling like the only one who dressed up for the prom, I wondered where everyone would be, these 10,000 or so workers who spend their time in this four-towered monster. My question was quickly answered when I met my appointment, who was happy to tell me he was off home to Ballarat as soon as our meeting was over, and that would be at 11 am!

Work time is no longer fixed between 8.30am and 5.30pm with two fifteen-minute smokos and an hour lunch, ‘Peter Lalor’ would roll over in his grave! Work is when you want it, or rather when you have too; from your laptop – whilst you have lunch, next to your pool or after you picked up the kids. Then you get out one more email between making dinner, teaching kids to read and yelling at the youngest to get in the bath. This is now the new working normal, and it’s not being stuck on a train or in traffic. I like it. It’s healthier and probably more efficient!

Impact on regional centres?

All positive! Victorian regional centres have continued to buck the trend and provide growing market conditions for property. The migration from capital cities to regional Australia increased by 16.60% in the past year, the highest level yet. In the past quarter (June 2022), the number of people moving from the capital cities was 9.00% higher than the post-pandemic average and 26.70% higher than the average during the two years before the pandemic. To bolster this number are the wave of people coming back from Queensland. Nothing like a good flood to rethink lifestyle choices!

Regional centres have become the place where affordability meets lifestyle. It might surprise you that the medium house price in Victoria rose by 1.30% across the last quarter (June 2022), whilst rental yields jumped a whopping 3.40%.

Our new “normal” is a slower market, with interest rates around 5.00% and slower sustainable growth. The days of trading property like share market stocks are well over. The new normal is focusing on “lifestyle”, not $$$. I like it. It’s more stable and economically healthier.