CeO’s report

Quentin Kilian

REIV CEO

It’s been an interesting few months in real estate, politics and the economy.

We’ve seen interest rates going up (which was not unexpected); we’ve seen a change of our Federal government (which did include some surprises); and we’ve seen movements in property and rental prices which has led to a great deal of hyperbole from the media and a plethora of ‘experts’ expounding their views (which is never unexpected).

We’ve been working hard at the REIV to chart a new and exciting course for the Institute and our Members.

We are nearing the end of the scoping stage for your new website and about to start the exciting work of pulling it all together. We have a new advertising campaign due to kick off in september that will go out across Victoria to drive awareness of the REAL value of dealing with REIV members. the REIV is driving a Property taxation forum with other industry groups and we have written to the Victorian treasurer inviting him to meet with us and to stage a larger discussion on change to the property tax regime in Victoria. the President and I met again with Minister Horne and got some real traction on the move towards an Interim Certificate for CertIV students; Mutual Recognition and s55 of the Estate Agents Act, all of which we are continuing to follow up on.

On the ‘home front’ we have made some staffing changes and are reinvigorating areas including our training Department and PD products. the REIV Conference is taking shape for March 2023 and of course the REIV Auctioneer of the Year competition is just around the corner as I write this, plus nominations are a open for the REIV Awards for Excellence.

One of the hottest topics of conversation, particularly in the media, is rising interest rates. so let’s have a look at interest rates and put a bit of historical perspective to them. the current Cash Rate, as set by the Reserve Bank of Australia, is 1.85%. Looking at various websites, the ‘variable’ home loans are at anywhere between 2.56% and 3.75%, and ‘Fixed term’ home loans are sitting around 5% for three-year loans and closer to 7% for five-year loans.

While the focus of the media, and most Australians, is on the month by month decisions of the RBA with its cash rate, the banks have been building in rate rises to their fixed term products for over 12 months, and based on the five-year products, are expecting the cash rate to sit around the 3% to 3.5% position.

While there is an obvious impact to the hip pocket, it is important to put some historical perspective to Australian interest rates. Interest rates have averaged around 3.87% from 1990 to 2022. they hit a high of 17.5% from June 1989 to April 1990 (or 21% for investors…as I sadly discovered back then), and hit an historical low of 0.10% in November 2020.

Just 14 years ago, in August 2008 (when the wife and I purchased our home in sydney) rates were at 9.62%. since 2008 to 2011 rates hovered around 5%, going back up to 7.79% in January 2011.

the cash rate at sub 1% was artificially low and while the Reserve Bank doesn’t declare its preferred position, it’s generally around 3%. Banks then add a buffer of at least 3%, which would put a ‘normalised’ loan position around the 6% mark.

the bottom line is that interest rates go up and down, subject to a range of economic drivers, but even at their peak

of 17.5% property sales The bottom line is continued, and there that interest rates is no reason to believe go up and down, that the same will not occur in this current subject to a range of market. economic drivers, but even at their peak Choices will change of 17.5% property as borrowing capacity changes; prices will sales continued change to reflect the buying market; our industry will need to adapt to the changes in the market; demand will differ; but at the end of the day Victorians will continue to buy and sell property. But perhaps bigger issues to be examined are supply and taxation. A lack of housing supply coming through, due to constraints in the building industry caused by components and staffing, is going to a bigger concern than the home loan rate. If this is not addressed by all state governments and the Federal government it will create a supply-demand imbalance that will have a major impact on affordability. And on the taxation side, in some cases almost 40% of a house purchase is taxation. getting rid of inequitable and lazy taxes on property transactions will immediately make property purchases more ‘affordable’. that’s my rant for this issue of EA, now it’s back to work. Don’t forget that the REIV is your institute, so if there’s anything you would like to tell us, or ideas you have for events, activities, professional development or innovation, please let us know by writing to us at

reiv@reiv.com.au

Quentin Kilian REIV CEO