Melbourne auctions are holding steady after a rise in interest rates, while the CGT debate is roiling investors, with PropTrack showing a preliminary approval rating of 65 per cent.
Buyers in Melbourne barely blinked after the rate hike, but the new capital gains tax debate has investors in turmoil as auctions hold up.
While on-ground activity has remained resilient through February, experts warn that the combined pressures of declining borrowing power and renewed fiscal uncertainty will reshape market behavior.
Baseline chief financial officer Ari Levinson said the latest rate hike had already reduced borrowing capacity for typical Melbourne households, intensifying competition even as buyer demand still looked strong.
RELATED: Melb Qantas couple sells their first home for $683,000
Melb’s 30-to-1 ownership battle: Supply reaches zero
Bulldogs stare at large properties
Borrowing power generally falls by about 2.3 percent to 2.5 percent for every 0.25 percentage point increase in interest rates, he said.
For a Melbourne couple who earned a combined $180,000 a year and could previously borrow about $925,000, that amounted to roughly $21,000 to $23,000 of capacity being cut, reducing this to about $902,000 to $904,000.
“That may not feel dramatic in itself, but it can be the difference between competing confidently and missing out,” Levinson said.
Baseline chief financial officer Ari Levinson says rising interest rates are tightening borrowing power for Melbourne buyers ahead of February.
What the rate hike has already cost buyers: Basic financial data shows a typical Melbourne couple’s borrowing power drops from $925,000 to about $902,000-$904,000.
He warned that further increases could increase pressure on household budgets, pushing more buyers toward mortgage stress, typically defined as repayments exceeding 30 to 35 percent of gross household income.
Mr. Levinson said buyers planning to bid in the coming weeks should check their borrowing limits early, avoid taking out new credit and speak to brokers before the auction, noting that even small changes in debt levels or interest rates could materially affect approvals.
The double whammy of higher interest rates and the renewed CGT debate is increasing pressure on buyers, investors and renters across Melbourne.
Prominent buyer advocate Cate Bakos said buyers had largely priced in the interest rate move, with little sign of hesitation at inspections or auctions.
“Interestingly, I haven’t seen anyone take a step back,” Bakos said.
“Buyer research was virtually seamless compared to last year, and even after the rate announcement there was no noticeable delay.”
Buyer advocate and PIPA chair Cate Bakos says Melbourne buyers have largely priced in the interest rate rise, while auction competition remains stable.
Ms Bakos said the CGT uncertainty was primarily of interest to investors and potential investors, but the impact could spill over into the rental market if more landlords left.
“That’s the paradox,” she said.
“Discouraging investors risks removing rental inventory if we don’t have enough housing to house tenants.”
Alba managing director Thomas Mifsud says investors are considering CGT uncertainty as part of wider portfolio decisions over the next 12 to 18 months.
Alba managing director Thomas Mifsud said investors typically responded to policy uncertainty in phases rather than rushing to sell.
“The first reaction is reactionary: people pick up the phone and ask, ‘How does this affect me?’” Mr. Mifsud said.
“Once the emotion settles, it becomes a portfolio question.”
He said it is unlikely that most existing investors will sell immediately, but many will reassess the strategy over the next 12 to 18 months depending on how markets and policies evolve.
“Existing owners generally hang on for as long as possible,” says Mifsud.
“It’s the people who are on the sidelines trying to get in who feel this the most.”
33 Stephens St, Balwyn North sold for $3.135 million as Melbourne auctions held firm despite the latest rate hike.
6 Bayles Crt, Donvale sold for $2.003 million, highlighting the continued demand for quality family homes at Melbourne auctions.
Melbourne’s auction market showed few signs of buckling, with PropTrack figures showing a preliminary clearance rate of 65 per cent based on 353 reported results, with 230 homes sold.
Several strong results at the top end indicated continued demand for quality homes, including a $3.135 million sale in Balwyn North and a $2.003 million result in Donvale, while results of almost $1.8 million in Box Hill North and Mentone also underlined buyer interest.
35 Ashley St, Box Hill North sold for $1.79 million as buyers remained active following the RBA rate hike.
113 Whitby St, Brunswick West sold for $1.69 million as inner-city demand held up at Melbourne auctions.
Demand in the downtown area remained robust, with a home in Brunswick West selling for $1.69 million.
Agents said some buyers remained cautious around price caps, but competition for A-grade homes was resilient, suggesting most bidders had already factored higher financing costs into their expectations before bidding.
Sign up for the Herald Sun weekly property update. Click here to receive the latest news from the Victorian property market straight to your inbox.
MORE: ‘Homeless by text message’: a tenant’s fourteen-day nightmare exposedPortelli launches budget Aussie fuel empire
Investor gains 90% as Aus rental shortage worsens
david.bonaddio@news.com.au
#Rate #hike #CGT #debate #roil #Melbourne #auctions #realestate.com.au