Property point

Real estate commentators are suggesting the traditional spring selling season might not be as good as usual for vendors in the big southern markets such as Sydney and Melbourne.
There is a fair degree of economic uncertainty relating to a possible recession and the feeling is that in those high-priced capitals there might be an impact on real estate over the coming months.
Higher interest rates are tied up in all this and they have limited the borrowing power of many buyers.
The informative on-line real estate news entity Property Buzz recently reported that Compare the Market Property Expert Andrew Winter said: “We’ve started to see the steam coming off asking prices in some of the capitals including Sydney and Melbourne as sellers adjust their expectations in line with buyers’ reduced borrowing capacity.”
Property Buzz also reported that SQM Research data shows asking prices in capital cities dropped 0.5% in July, with Sydney experiencing the largest decline of 1.3% for house listings.
But at the same time the latest Australian Bureau of Statistics (ABS) Lending Indicators data shows the average new loan size for owner-occupier borrowers in Australia reached a record high of $640,998 in July.
It will be interesting to see how these economic concerns impact the southern markets and, of course, whether there is going to be a flow-on effect in the Mackay market.
There are several things to note. One is that the aforementioned current average Australian loan of $640,998 is nowhere near that in Mackay. In fact, the average house price in Mackay is nowhere near the Australian average loan size.
So the impact of higher interest rates is no going to be the same here as it is elsewhere, particularly in those cities that have high higher-than-average-loans.
The other thing to consider is that rents are relatively higher here than in the southern markets. So for many people it makes sense to buy a property for $450,000 rather than pay $600 a week in rent.
And that price of $450,000 is real and it is relevant. In those markets where the experts are predicting a drop in prices you can’t buy a house for anywhere near $450,000. So our affordability is a factor in this market.
So when you have dual considerations of relatively low sale prices and high rental prices there is still a strong buyers’ market. Interest rates don’t hurt nearly as much if you are buying a $450,000-$500,000 house compared to a $800,000-$1m+ property.
And the other thing that is continuing to drive our market is the investors. These people live in those markets where the experts are predicting a cooler spring selling season. And they have buyers agents and others telling them that Mackay is the place to invest because it is affordable and the rental returns are terrific.
In his recent state of the market update, one of the southern buyers agents, Niall Gilhooly, theorised on why buyers are moving away from the higher-priced capitals and looking for value in more-affordable cities and suburbs.
He said higher interest rates mean lower borrowing capacity, with many buyers’ borrowing power reduced by 30-40 per cent as rates rose over the past two years. 
Gilhooly’s view is that this has forced buyers away from the more expensive cities, such as Sydney and Melbourne, and towards cheaper cities such as Brisbane, Adelaide and Perth.
I don’t know if our region is on Gilhooly’s radar but I would argue that these are the very factors that are helping drive Mackay’s market.
Affordable prices and high rental yields are more important than ever with higher interest rates putting a handbrake on the Australian economy.

‍