HOUSING CRISIS DEEPENS
Rental availability at shocking new low, as first rate hike in over 10 years hits
THE Reserve Bank’s decision to lift interest rates will come as a blow for North Queensland households struggling with cost of living pressures but the “sky isn’t falling down yet,” according to a local economist.
For the first time in almost 12 years, skyrocketing inflation has forced the RBA to pull the trigger on increasing the cash rate by 25 basis points to 35 basis points. “We expect this mortgage rate rise to cost Townsville around $10m,” economist Colin Dwyer said.
THE Reserve Bank’s decision to lift interest rates will come as a blow for North Queensland households struggling with cost of living pressures but the “sky isn’t falling down yet,” according to a local economist.
For the first time in almost 12 years, skyrocketing inflation has forced the RBA to pull the trigger on increasing the cash rate by 25 basis points to 35 basis points. Regional economist and adjunct professor Colin Dwyer crunched the numbers for some of Townsville’s key suburbs, based on the average mortgage for houses and units based on the median price in the suburb and the assumed rate of 2.34 per cent Identified as the suburb with the lowest monthly payments, Mr Dwyer calculated that Vincent residents would be paying an additional $23 per month.
On the other end of the spectrum, affluent Castle Hill mortgage holders would need to pay an additional $93 per month.
Mr Dwyer selected Townsville’s largest suburb Kirwan to use as the basis for calculating a citywide average, estimating a cost rise of $384 per year, $32 per month, or $8 per week.
“If we use that suburb as a benchmark average and extrapolate, we expect this mortgage rate rise to cost Townsville around $10m,” Mr Dwyer said.
“This comes before the new budget tax offset of $450 per taxpayer (two taxpayers per household) and during the six-month 22c reduction in petrol excise expected to be worth around $700/household.
“Combined they are estimated to be worth around $50m to the Townsville economy.” While Townsville mortgage-holders weren’t expected to be significantly impacted by this rate rise, Mr Dwyer expected the financial
pain to increase over the coming months.
He said the RBA anticipated headline inflation to rise from 5.1 per cent to 6 per cent, with underlying inflation rising from 3.7 per cent to 4.7 per cent.
“They’d like that underlying inflation to be between 2 and 3 per cent, so there’s going to be more interest rate rises in 2022.
“There is likely to be another interest rate rise in June, July, and possibly in August.
“I think it’s going to be higher next time around, we could see a 0.4 per cent increase next month, possibly a 0.5.”
It wasn’t all doom and gloom with the professor noting that Townsville’s household and business budgets were generally in a better position than before the pandemic struck. “Townsville homes are more affordable than the national average and mortgages are much lower,” he said.
“In addition there are solid average household incomes, stronger job security than four years ago, full employment conditions and strong job adverts and a solid construction pipeline.
“Townsville is likely to fare better than the national average because of this performance.”
Digital Finance Analytics principal Martin North said until recently Queensland had enjoyed relatively benign stress levels, but in the past two years price rises had seen households getting larger mortgages in a “shaky market”.
“If they’re not under stress today, it won’t take much to get them into stress,” he said.