Market Watch – July 22

2022-07-04 06:37

Over my many years of watching the property market, it is amusing the observe the media reaction to a downturn. Doom, gloom and catastrophe make good headlines but often seem to be a ploy to sell papers or get more internet clicks. Exaggerating the booms and busts is standard behaviour for the mainstream media.

It is natural that we have a correction after such a strong growth period. Undoubtedly, there are many negative headwinds affecting the current market: rising interest rates, attention on the election, flooding and weather events, inflation pressures, and negative consumer sentiment. All these factors are at play and causing buyer interest and demand to severely wane.

Online inquiry rates are down close to 40% on May 22 compared with June 21. Even with this serious drop in buyer demand, properties are still selling as life and death go on. We will always have the four D’s – Death, Downsizing, Debt and Divorce – so real estate listings and sales will keep happening, just at a less buoyant rate.

Buyer’s Market

The mood has changed from FOMO – Fear of Missing, Out to FOOP – Fear of Over Paying.  The switch from a seller’s market to one that benefits buyers is just that – it is now a good time to buy. Currently, I am not seeing any significant downturn in prices locally, but motivated vendors are certainly aware they will need to be realistic and competitive to sell in this market.

According to Corelogic, Regional Australia experienced a 0.5% price lift in May, but this was not enough to keep the national market in positive territory. Larger price falls were experienced in all the major cities except Brisbane and Adelaide. But in June, even these two cities experienced small drops. May was the first month since September 20 that the national housing price index went negative.

If you do not need to sell your existing home to buy, then this would be a good time to start the search and make offers. This is one of the few times in this highly desirous locale when vendors may be forced to settle for less than market value. As we are at the winter solstice, this saying is appropriate: ‘Buy sun hats in winter!’ If you are selling and buying in the same market, and intend to hold long term, then it does not really matter where on the trend line you do it. This article from Domain gives a second opinion on the ‘whether to buy now or later’ dilemma.

Picking the Bottom

To those that are thinking that the market still has further to fall and will wait for the bottom, good luck to you. If you have the foresight to know how to pick the market, then you obviously have access to higher powers and you don’t need to read this. My hunch, without any access to science or data, is that our market, not necessarily the national one, will have a small median house retreat (5%) and then show signs of strengthening again as early as later this year.

If wanting to pick the bottom is something that interests you, we only have historical data to go on. Below are two graphs that give the number of months from peak to trough and from peak to recovery. The number of months from top to trough is between 1 – 8.4. The number of months from peak to full recovery for all the property downturns going back to 1990, is 9 to 39 months.

Again, these graphs are for the national market and mainly deal with suburban tract homes and units. Byron Shire and other parts of the Northern Rivers will be dealing with a micro-market and not as affected by the negative headwinds listed above. Recent buyers here were not heavily mortgaged as most were cash transactions and therefore not panicked by rising interest rates. Our severe housing shortage will sustain demand for owner-occupiers and renters, and assuming this area remains a desirable place to visit and live, the downturn will be short-lived.

Other Problems

The main problem for incoming buyers here has usually been the highly competitive market. As a buyer’s agent over the last few years, I have been earning my fee mainly by getting my clients ahead of the other buyers. The current issue for incoming buyers is the need to be aware that we are also suffering from supply and labour shortages. It is very difficult to get trades or service providers. Building materials and some products are difficult to source and very expensive. Builders and renovators are averse to taking on fixed-cost quotes. Best to stay away from new builds or renovations in this present climate.

If you are thinking of listing, the main requirement is getting an accurate estimate. It would be difficult to value most rural and unique properties in this changeable market. Getting good advice will be crucial and could make the difference between a successful outcome and falling way short. If you do not already have a good relationship with an experienced agent, I would be happy to talk to you about my vendor’s advocacy service.

Short Term Holiday Letting limit

For those that have not been paying attention, BSC looks like they will successfully be able to introduce their long-sought-after 90-day STHL limit. This will allow a 365-day holiday letting in certain zones (Wategos, Belongil, Suffolk Beach, etc), but only a 90-day limit in all other areas. I have heard some chatter that this may cause a sell-off of HL properties and affect the market. I am not aware of any evidence of this and don’t think it will make a lot of difference to property prices. Unfortunately, I also predict that it will make very little difference as a housing crisis solution – but happy to be proved wrong with that. More opinion on that here from a previous blog.

Byron Bay 2481

To provide some perspective on the recent housing trend line below is the CoreLogic chart for Byron Bay 2481. This is not indicative of the whole Byron Shire or wider Northern Rivers. It is also inflated because there have been quite a few top-end luxury properties for sale over the COVID period sold to pandemic refugees.

Conclusion

This commentary may seem overly upbeat. Yes, there are huge issues and concerns and I am certainly aware of the many factors that could bring on a general global asset crash. After clocking up more than a few decades of life experience I look back and think “When were we NOT on the edge of some major catastrophe?”. We always manage to muddle through – but there may come a time when we don’t.

Enjoy life in the meantime.

Byron Property Heading Into 2022

2022-02-24 01:00

For most, 2021 has been a dreadful year, but in the real estate market, it has been extraordinary. Lifestyle destinations like Byron Bay and most regional coastal towns have seen an unprecedented house price increase. There are winners and losers of course and the rental market is dire and accommodation is either non-existent, poor quality and always a long way from affordable.

Upward Trend Line

The market was already moving up in the regions prior to Covid 19. Work from home and families looking for better work/life balance was already a trend. Then the pandemic arrived and put a rocket under it. There was a short downturn in April/May 2020 when people realised Covid 19 was a major global disruptor. The main activity for many was to be online looking for escape routes to the country. Melbourne for example had a net negative migration of more than 10,000 in 2020.

Nationally, median house prices increased more than 25% for the calendar year. The median house price in Sydney, Melbourne and Canberra is now over $1 mil. Byron shire house prices have left this national average in the dust. We now have the highest median house prices in the country and therefore one of the most expensive real estate markets in the world.

Local Increases

Local median house price data varies slightly with different platforms. APM Pricefinder shows the following price increases in our region from the two years from 2019 to 2021:

Byron Bay (2481) :                $1.56mm – $2.84m     <54%

Brunswick Heads (2483) :  $1.15m – $1.84m          <62%

Bangalow (2479) :               $982,000 – $1.63m     <60%

Mullumbimby (2472) :         $711,000 –  $1,29m      <55%

The Byron Shire has the most expensive median house price of any regional area. It is $1,838,286, up 30.2% in 2021. It is above Sydney’s median house price of $1,389,948 and  Melbourne’s at $1,002,464. However, the biggest price increase for the year goes to Kiama, 90km south of Sydney. It was up 43.9 per cent, taking its median value to $1,633,086.

More Stock

One change is there is more stock online now than there was last year. Listing agents are always complaining they don’t have enough stock. Some sellers were probably trying to pick the peak of the trend line before listing and most may have waited too long. Especially with rural acreages in which there are more listings than usual.

Whether this will eventually wash out into lower prices is yet to be seen. My guess is no, as the depth of potential buyers, although less than last year, still appears to be strong. The villages of Bangalow, Brunswick Heads are Mullumbimby are again, as the year moves out of holiday and lockdowns, showing signs of heating up again after cooling a bit between November to January. Multiple bidders and competitive offers are normal on anything that is good and priced to meet the market.

Negative Headwinds

As usual, commentators are talking of bubbles and corrections. NAB released a report predicting a 10% price downturn next year. Westpac also had media with similar estimates. The expected rise in interest rates is seen to be a dampener on the market. This may be true for entry-level and the investor market. Struggle street is certainly sensitive to mortgage stress and cost of living concerns. For good or bad, the Byron region is now the home to lifestyle owner-occupiers who are less affected by interest rate rises. The majority of local deals of late seem to be cash buyers and not debt-dependent. In reality, offers subject to finance in this market are not prioritised by listing agents.

Cynical observers may look at the surge of media about interest rate rises and the advice for customers to fix rates as an income-generating ploy by the big four banks. The time to fix rates would be well before the actual rise occurs. Fixing your rates should only ever be for security and peace of mind. Very rarely does a rate fix ever save anyone money. The banks want to scare punters into fixing rates as it is good for their bottom line.

Airbnb effect?

It will be interesting to see if the incoming policy on Airbnb is going to be a negative headwind on Byron Bay prices. Since January 31st all properties listed for holiday letting will need to follow the 180-day rental limit imposed on the NSW government. All the Holiday Let platforms seem to be determined to enforce these policies and are delisting properties that are not registering.

Anecdotal evidence seems to be there is no panic and owners are prepared to limit themselves to 180 days of occupancy. HL practitioners assume that Byron Shire will not be successful in gaining the 90-day limit, which a few councillors (including Mayor Michael Lyon), are advocating. The 180-day limit will be successful in being a deterrent for new commercial operators trying to enter the market and going for maximum yield. This is a good thing but a 90-day limit will permanently damage the economy and employment of the region and do very little to deliver more affordable house rentals as hoped. The reasoning for this is here in this previous article.

The Manhattan Effect

In closing, I thought to include demographer and Commentator Bernard Salt’s commentary here:

“Frustrated Australian travel budgets are being redirected to lifestyle property in the form of a Byron bolthole or similar. Move permanently to “the weekender” or simply buy something more permanent far from the madding (and infected) crowd. This certainly seems to have been the Melbourne narrative early in the pandemic.

If this has been a consequence of the pandemic, then labour-dependent businesses within the weekender orbit of capital cities would start to suffer from the so-called Manhattan Effect, where essential workers can longer afford to live in the locale in which they deliver their essential labour.

Cleaners, cooks, gardeners, sanitation workers, waiters, labourers and others doing what needs to be done to make a city work are flung out, as if propelled by a centrifugal force, to the outermost reaches, not of New Jersey, but of the Northern Rivers, to the Noosa and Gold Coast hinterland, to the edges of Geelong, Wollongong and Newcastle. And indeed, from such places, essential workers must now commute to deliver their services.”

Winter Market Watch 2021 – May We Live in Interesting Times

2021-07-05 02:01

The last year and a bit have been the most intense and unusual I have ever experienced. When the first signs of the seriousness of COVID kicked in in March/April 2020, there was a serious contraction and expectations of a downturn, even depression. This expected slump was not to be and instead we have had the largest and longest boom cycle most of us in the industry have ever experienced.

BOOM NOT SLUMP

It certainly did look like gloom and doom at the beginning of the pandemic. Being a tourism centred economy, many small businesses were under serious stress and concern. Many SMEs were under pressure trying to keep the doors open. Ironically, some were able to be nimble and adaptable and found revenue growth. Some people enjoyed the experience of slowing down and smelling the roses. Especially during those first couple of months as we had perfect weather, no traffic and good surf.

With real estate, I know of people who sold at this time expecting further losses. This proved to be the wrong move. Who could have then imagined we would move into one of the most sustained and exuberant periods of capital gain growth and intense demand?

We now Beat Sydney

Byron Shire now has the expensive property in the country – by a country mile.  Only a few suburbs in the eastern suburbs and northern beaches of Sydney have higher property prices than Byron Shire. Byron Bay 2481 now has a median house price of $2.7 million while the Sydney average sits close to $1.4 mil. Internationally, Vancouver is the only other location that has higher property prices. Hong Kong was also a contender of this dubious honour until the recent Chinese political upheavals.

But there is a caveat for locals who are doing the math on this with their own home. This median is being skewed because of a large number of high end, luxury properties being sold in 2020/21. It is a mistake to expect every suburban home in the shire to experience a similar capital gain. There certainly is an increase, but not double.

The attached graph shows you the median house price chart for Byron Bay. The local property market was already on a strong upswing during 2018/19. It then hit a slump in 2020 with COVID but then took off in an almost classic hockey stick chart. The median house price nearly doubled from around $1.4 mil to $2.7 mil. This is for Byron Bay 2481. Bangalow has had a median house price growth of 24% for the year, Mullumbimby 26.9%, Brunswick Heads 24.9% and Ocean Shores 17.3%.

Winners and Losers

With every major transition in a market like this, there are winners and losers. The situation with the rental market and affordable housing is dire. Rental vacancies were down to 0.03% when an average is supposed to be 3%. That means that for every 100 homes, 3 at any one time would be available for rent. That is how it should be but not the case now.

This is not just causing homelessness and social housing issues. Many long term residents are being forced out of the shire. Business owners, especially restaurants, are having problems keeping staff as there is no housing for workers and many are forced to commute long distances. Some business owners have resorted to trying to buy houses to secure accommodation for staff. Key workers like nurses, teachers and police are having difficulty finding housing. It has not been uncommon to hear about employed people or single parents being forced to sleep in their cars or vans.

Future Predictions

It is commonly accepted that this level of the price increase and demand is not sustainable. However, no one is commenting that we are in the midst of a bubble or imminent crash. Economists are predicting further price lifts before the end of the year.

A crash will only happen when there is an excess in the product due to overdevelopment, or excess in rental stock. There could be a turndown if the present record low-interest rates start the rise quickly but the RBA has signalled these rates will remain low till 2014 at least.

We are no longer seeing the intense demand for finished, top-end luxury homes (over $5 mil). It is still strong but we are not seeing the kind of uplift that has skewed the median house price data so strongly. We are still seeing massive demand for entry-level and suburban homes because of the scramble for people to secure a place to live. I have been to many auctions of homes under $2 mil and all have gone way over the advertised price range. I expect this to continue – at least for the remainder of the year.

Drill Down in the Data

  • Westpac’s quarterly Housing Pulse report says this is officially a boom.
  • most of the 90-odd sub-markets being tracked had recorded gains running at a double-digit annualised growth pace.
  • Not one recorded a decline. “This is very rare in the history of Australian property cycles which more usually see a few markets ‘sit it out when prices are on the move”, the report said.
  • HIA New Home Sales report shows that sales of new homes in NSW increased by 15.2 per cent in May 2021 compared to the previous month. This is 2.9 per cent higher than the same time in 2020.
  • Sales are 36.9% higher than April and May last year.
  • There is expected to be a record number of new home starts in 2021
  • The attached article below is from Realestate.com.au with more info on the local market

Byron Bay Replaces Sydney as Highest Priced Property

Market Watch Summer 2021

2021-01-30 03:16

I usually do a market watch article every six months or so. However, sometimes the market is unusual that it needs more commentary. This is one of those times. Many readers may wish for this article to tell you what’s going on, and what’s going to happen next? I can only answer “I don’t know” to both questions.

I do know that for me and for all the selling agents I have talked to, we have never seen anything like this. In the past I have witnessed more than a couple of extremely strong market surges – 2002/03 and 2016/17 come to mind. But this current market is double that and on steroids.

Stories from the Front Line

Just before the Xmas break, I was booked to bid at three auctions. They were all cancelled due to each property being sold prior to the auction. The couple of auctions I did attend, I was left holding a paddle limp while watching the bidding fly past the estimated range. I have been on the way to inspections, with clients in the car, only to be called by the listing agent saying the vendors have changed their price now put an extra 50%. I went on a journey with a client where we were bidding on a rural acre in a good location. The expected range was advertised as $1.3- 1.5 mil. We pulled out when the bidding went past $1.9 mil.

It is hard to say how long this market will hold up like this. Some commentators are saying we are at the peak and it is true that a lot of buyers are hesitant now with lots of media on this story.

Background

Byron Bay has taken the crown for the highest house price growth of any suburb in the country last year, with house prices rising by an astonishing 37 per cent. The median house price is now $1.68 million.

The rapid growth has prompted a spillover effect in neighbouring towns, with the median house price in the Byron Shire overall rising 26 per cent in 2020. The median house price in the town of Bangalow rose 24 per cent to a $1.175 million median while Mullumbimby rose 16.6 per cent to $830,000.

Construction Led Recovery

We are at the effect of major economic and demographic shifts. The post-COVID flight from the cities and the ability to work from home are having an impact. Plus, there is a financial ecosystem with government packages and incentives turbocharging the construction industry and property.

A recent internal RBA document, released under FOI pressure, estimated that property will have 30% growth in the next three years. But this is no secret, in the government’s own words: “This is a construction led post-COVID recovery”. The various first homeowner grants and renovation incentives have been over-subscribed and the federal government is expected to spend around $2 billion in this space.

Entry Level

At the lower end of the local market, we are seeing a frenzied level of demand for anything lower below $1.5 mil.  Anything below the median is now in the crosshairs of anyone who can pull their resources together to get a piece of the local market before it gets out of reach.

This FOMO is being exacerbated by the numerous distressing stories of rental demand. As was reported in the SMH earlier in the month, Byron’s vacancy rate now sits at a worrying 0.03% as opposed to the still low 3.1% in December 2019. The rental shortfall was exacerbated by the influx of film and TV people here at the end of last year and expect more of that to come.

Top End

We are having out of this world prices paid for top-end properties. This is something many of us are now concerned about. Byron Shire is now on the radar of an investor class that is happy to park money in luxury real estate. This could replace the wealthy lifestyle market we have been seeing for the last few years. Lifestyle buyers can easily be absorbed and assimilated and help maintain “the vibe”. This new class of buyer are only passing through and will leave it empty most of the year.

A good example of this activity is evident in the proposed listing of a house in Bay Street Byron. This property, on the market for $60 mil,  is also mentioned in Hot Property. The developer, Adam Hammond, has said the property “was likely to attract more international interest, given its scale and price tag. The sort of person who can spend just over $60 million Australian on a house, which realistically will be a holiday house, will likely have a net worth of at least half a billion dollars.”

Not Impressed

As you can imagine, the news that we are now going be intermittently visited by some of the 1% who come once a year to check on their money, is not something most people will be rejoicing over. For many long-term locals who have invested time and energy making this place but not had the desire or ability to buy something previous to the price rises are feeling the pressure.

Many would assume this would be a great time to be a buyers agent here with all this going on. It is not a matter of making hay while the sun shines. It is hard to get a deal done and it is not easy advising my clients to be rash and pay well over market value. Like many other agents I know, we are not just in this for the money – normality and just doing a good job for our clients would be the preferable option.

And for the data-driven, the Stats:

  • CoreLogic data shows that dwelling values in capital cities rose 2 per cent during 2020. However regional markets rose a remarkable 7%. The last time this happened was in 2004.
  • The number of loans for the construction of a new home saw record-breaking levels in November 2020, as the figure, tracked by the ABS, record its sixth consecutive rise.
  • New home loan commitments in November jumped a further 7.2 per cent higher than the record-breaking levels in October 2020 to now be 99 per cent higher over the year.
  • Stimulus measures and low-interest rates through 2020 resulted in building approvals reaching an eleven-year high in November, according to the Australian Bureau of Statistics (ABS).
  • House approvals rose for the fifth consecutive month in November, seasonally adjusted, reaching the highest recorded level since December 1999.
  • Approvals for renovation work also peaked, reaching an all-time high in November.
  • According to ME Bank Andrew Bartello, topping the property trends in 2021 is the desire for ‘urban village’ living, related to the significant increase of professionals working from home. “With the daily commute no longer a deciding factor in the home buying process, regional areas within a commutable distance to CBDs are being added to homebuyers’ wish lists.
  • If you can access Apple News, this article from the AGE is interesting.

Price Rises Expected

2020-11-30 04:08

In September we viewed this chart showing the price surge that Byron Bay 2481 had between 2014 to 2017. Shire-wide was just as intense, with a 72% increase in just 5 years from an average price of $530,000 in 2014 to $910,000 in 2018.

 

Since 2017 there has been a downturn in 2481, but as suspected, prices have surged in the latter half of this year. some notable record breakers are in Wategos Beach as mentioned in the video.

Part of what is driving this surge is an influx of wealthy buyers who are willing to pay far over the normal market value, even for luxury properties. Unfortunately, this also carries through for properties under $1.5 million making them a very rare find.

Local Concerns

2020-11-30 03:53

Last Market Watch it was noted that rental supply and housing stress issues will flare and we have certainly seen this in the community to an extreme extent. An influx of wealthy out-of-towners has pushed out local potential buyers, as well as causing the market to become fraught and move at lightning speed. Michael shares a few tips in the video that may help when navigating rapids of buying in the shire.

Market Watch – September

2020-08-27 05:18

The Byron market is still in hyperdrive. Especially small rural acreages close to the coast. The new post-COVID work-from-home ethos and the flight from the cities looks to be more than just a passing trend. We have had other surges like this, but this one is probably the most extreme. Bangalow was the location with the second-highest search request in realestate.com.au last month.

No New Listings

We are at the start of a classic supply and demand squeeze. Byron Shire averages around 450 listings at any one time, currently, we are only seeing listings around 250. We have high demand from new buyers but very few locals are wanting to go anywhere.  I do not see this trend changing in the near future – at least till well after COVID-19 pandemic is behind us.

Price Rises Expected

The first price rise surge I experienced like this was in the early 2000s. The recent period of strong growth was between 2014 and then peaked in late 2017 before pulling back a bit. The median house price almost doubled then from $900k to $1,600,000 in postcode 2481. Shire-wide was just as intense, with a 72% increase in just 5 years from an average price of $530,000 in 2014 to $910,000 in 2018. There was also a post-GFC bump around 2010/11 but this has nothing compared to these other two.

The attached chart shows the unprecedented price surge that Byron Bay 2481 had between 2014 to 2017. Since then there has been a downturn but price increases should be expected for the last half of this year due to the increase in demand and the decrease in new stock.

Dark Clouds

Some media is still predicting a collapse in property prices still to come. The federal government stimulus package is to be ceased or wound back in September. This may have an impact on built-up medium density areas in the cities but will be minimal here.

There are definitely some forced sales happening and I have seen a couple already.  We will not be immune from forced downsizing, finance, and liquidity issues. But generally, the Byron area is mainly inhabited by owner-occupiers who are holding very little debt. I recently heard a loan manager from one of the major banks complaining of not experiencing any higher demand as very few new buyers are in need of a mortgage.

Immigration Numbers

Continuous growth in immigration has been one reason why Australia has grown and maintained one of the highest real estate prices in the world.  The large influx of immigration since the early 2000s has not been met with an equal increase in housing supply. This article linked below goes into detail on this topic and is well worth reading for anyone with an interest in this subject.

Local Concerns

As always, Byron will continue experiencing increasing issues with rental supply and housing stress. If this current market upturn is anything like the last one, Byron median house price will go stratospheric. Byron Council’s tinkering on the edges with Airbnb restrictions and the Granny Flat Moratorium will not put a dent in the side of our current undersupply of dwellings.

Housing Diversity

Most of us wish to keep a diverse, multi-textured community that also incorporates artists, musicians, surfers, and navel-gazers.  This is part of what makes living here so fabulous! It will be an issue for our community if the property and rental prices rise too high then we become a monoculture. The other problem we have is a lack of housing diversity. Please read the next article – ALTERNATIVE HOUSING MODELS – to get more information on what housing diversity looks like.

Read more at Property Observer

Real Estate Buyers Agent

BYRON BAY | BALLINA | LISMORE | OCEAN SHORES




     

    • Since 1999

      250+ happy clients

    • $310 mil

      Properties sold across the Northern Rivers

    • 1 in 5

      Properties purchased off market

    Recent Posts

    Recent Comments