The topic on everyone’s lips. Interest rates

Hi all, the topic on everyone’s mind currently and certainly the questions I am being asked most frequently at present, relate to interest rates and inflation and how these factors are likely to impact what has been and remains a strong Gold Coast property market.

After a lengthy period of relatively dormant inflation, often below the reserve bank target of 2-3%, 2021 recorded CPI at 3.5%. Although this is not as high as some of our international neighbours, it is causing a great deal of chatter about interest rate increases.

If you’ve enquired as to a home loan in recent months you would know that the big banks are already factoring in a rate rise and loans are being quoted at roughly 1% higher than was readily available last year.

There are several things that are driving inflation. We’ve had zero immigration for the last two years which, has resulted in significant skills shortages aligned to international labour forces that, we historically rely on. This places pressure on businesses to pay higher wages to attract domestic skills to their businesses. Basically, a competition of sorts between operators which, as all cost pressures generally do, flows through to price increases for the consumer. There is also the stark reality of unprecedented government debt because of covid related stimulus and government spending.

Logistics and shipping issues around the world has created stock shortages in many sectors which again, leads to price increases.

And now, regrettably, we have conflict in Ukraine. With the Russian invasion certain to place upward pressures on the cost of fuel. This will most certainly add to the already struggling shipping industry and again, put upward pressure on inflation.

Having said all the above, the key thing to remember is that, although there are several catalysts to inflation currently, and despite the banks already lifting their rates pre-emptive of likely action to be taken by the Reserve Bank of Australia, it is highly unlikely that the RBA with increase interest rates prior to the federal election which is to be held on or before the 21st of May (2022).

Worth noting also is that, when the RBA lifts interest rates, it will do so slowly and in small doses at first. Likely a 0.5% rate rise initially. Then, the RBA will observe the market response before further increases. So, for now we anticipate low level impacts from potential rate rises on consumer confidence and therefor the Gold Coast property market. Unfortunately, one of the mechanisms that will largely determine the impact of any potential rate rises will be the nature of any media reporting on the topic which, historically tends to lean a little toward the worst case and even unlikely scenarios. Remembering that, perception is what, most directly drives consumer confidence and subsequently what determines the impact of it on markets.

Fortunately, since the royal commission, banks are obligated to ensure that, borrowers can handle a rate rise of up to 2% and so, a lift of 1% is unlikely to cause any real worry at this stage.

Largely, this space is still somewhat speculative and with the federal election not due to take place until mid this year at the earliest, the Gold Coast property market, still driven by supply shortages and propped up by its incredible lifestyle offering, is relatively solid, at least for the first half of this year. It would be reasonable to expect some flattening of the market in the second half of this year.

So, in summary, if you’re considering selling then, now may be a great time for you take advantage of what, broadly remains a strong local market. If you’d like more information, please do reach out to the Ellie Jean team, as we’d love to help you in any way we can.

Alternatively, if you’re considering moving to the beautiful Gold Coast, please get in touch with us as early as possible so that, we stand the best chance of being able to help you secure your dream property. With strong demand for Gold Coast property, timing really is a crucial element to securing what it is you are looking for.

So, for now, thank you for reading, I hope that everyone managed to endure the extreme weather that we ended March with and that you did so without too much damage or danger.

Best wishes,

Ellie Jean.