There has been a lot of speculation on whether the property market has hit bottom. For most of last year, the general market has been in decline with the consensus that there has been an 18-20% drop in the median house price from March 22 – March 23.
Some indicators signal that the market is on an upturn. February national median house price increased by 0.2% and March increased by 0.6%. Now with a 0.5% increase announced today for April, that is a strong trend line suggesting we have passed the trough. There is also a renewed interest from investors who are usually the first out sniffing for bargains. But the market has not yet moved from FOO (Fear Of Overpaying) to making offers. This link to an article from The Domian is also worth a read.
The top-end, prestige market is still doing better than fair. As you can see by looking at the Hot Property section of this newsletter. The recent record price of $26 mil has now been smashed by a recent rural sale of $37 mil. Other big sales in the luxury end have also occurred.
Hesitation
There is still nervousness and caution out there. It will take a bit more than a few slight rises to turn it from a buyer’s to a seller’s market. Whatever happens with the RBA announcement today, we are still a distance from a full return to market confidence. It would seem that rate rises are not over yet.
There is also a hidden, poison pill in this string of interest rate increases. Rate rises and inflation is not the only things affecting property sentiment. There is also what is known as the Fixed Rate Cliff. This is the possibility that many mortgage holders will be coming off their fixed interest rate loans from April on and be faced with higher interest rates. This, coupled with inflationary pressures on spending may force a contingent of homeowners into a forced or distressed sale. This could cause a domino effect of house listings which would flood the market and send prices south. This will also be doubly distressing to those with Negative Equity – where their house is worth less than their mortgage.
There are also the doomsayer prophets. This is a cohort of observers who believe another financial meltdown is in the wings. Their number swells and drops over time, depending on the economic headwinds. I do not believe they are right or wrong but their rising ranks are another cause of more people keeping their chips off the table.
Also acting as deflationary is the post covid increase in building materials and trades. Vacant land sales are certainly experiencing lower demand as building quotes are high. Buying opportunities are certainly better for established housing than starting from scratch. At present it is cheaper to buy new rather than build from scratch.
Overview
It is a novel feeling to drive around these days and see ‘For Sale’ signs displayed in front of houses for many, long months. It must be dispiriting for the owners. It is a difficult decision on whether to cut losses and meet the market, or hang on until you find the price you believe in. I have no advice there.
The sentiment is that the RBA will do more rate rise, if not today, then soon and leave it to plateau for a while. No one expects a full back to normal until interest rates have held steady for a few months at least. If that is the case, the market in spring will be a lot stronger than it was last year.
As a buyers agent who has seen the local market fluctuate over decades, my experience has been that these windows where property prices are lower are quite rare. However, I understand the natural suspicion when someone who is involved in the real estate industry says that now is a good time to buy. Also, no one knows anything for certain in this world.