Today, I had coffee with some property owners in the eastern suburbs. The topic of conversation was the real estate market, the rising cost of living, and the impact of interest rates.
In order to control inflation, the Reserve Bank of Australia uses interest rates (in an endeavour) to keep inflation in the range of 2% to 3% pa. The government can also introduce fiscal policies to reduce inflation by increasing taxes or cutting spending.
Strangely, there hasn’t been a review of the RBA, or the setting of monetary policy, since our inflation-targeting regime was created in the early 1990s. This is despite the fact that economic conditions have changed significantly since then, with globalization, technological advances, and the emergence of new markets.
My recent article addresses the impact of major events on property prices. In a nutshell, Australian real estate remains robust and is one of the safest forms of wealth retention. According to the Australian Bureau of Statistics, the total value of residential dwellings in Australia rose by $140 billion to $9.8 trillion in the first quarter of 2023, s four times the size of Australia’s GDP.
Last week’s auction shows 81% clearance rate total sales value $299,041,399, and a median price of $1,608,000 per property.
A five-bedroom house at 10 Fairweather Street, Bellevue Hill, sold for $15.2 million at auction last Saturday, fetching more than five times what it last traded for in 2011.
A Paddington apartment sold for more than $20 million last Friday, smashing a suburb record that has long been dominated by the local grand Victorian terraces and converted warehouses and hotels.
The smallest, if not the cheapest, house on the Point Piper waterfront is tipped to have sold for more than $23 million.
The house at 26 Olphert Ave, Vaucluse, sold for $18m pre-auction, netting an impressive $4 million profit in two years.
The median house price in Vaucluse has remained steady over the past 12 months, with the average home costing $8.375m to purchase.
A One-bedroom Potts Point apartment, newly renovated, sold for $1.73 million. In 2022 the same apartment sold for $1.3m.
Economists predict a potential recession in light of increasing interest rates and inflationary pressures, highlighting Sydney’s polarised property market.