A crossroads is what the Australian property market seems to be at presently. On one hand, several indicators point towards the market bottoming out, and on the other hand, there’s a looming uncertainty that further decline may be ahead. The recent reports from CoreLogic and BrokerNews shed light on this rather unusual and uncertain state of the Australian housing market.
According to CoreLogic’s Home Value Index, the downturn in Australia’s housing market appears to be over. After a drop of -9.1% between May 2022 and February 2023, the national home value index started to show a promising upward trend with a half percent increase in April, following a 0.6% lift in March.
Tim Lawless, Research Director at CoreLogic, observes a positive shift in several indicators, including auction clearance rates and home sales, which are now trending around the previous five-year average1. This trend is occurring even as interest rates remain above average, a phenomenon last seen during the mid-to-late 2000s’ mining boom.
On the flip side, a significant increase in net overseas migration, combined with a lack of housing supply, is creating an imbalance in the market1. This is supported by data from a survey by Send Money Australia, where 65% of respondents expressed concerns about rising house prices and rents due to higher immigration.
Nathaniel Truong, director of Loan Lounge, echoes these concerns, stating that while migration supports population growth and fuels economic activity, it also puts pressure on housing prices and supply.
In these conflicting circumstances, what should vendors do? Wait for a clear market direction or act now?
Spring, traditionally known as the selling season in the real estate market, often sees a surge in property listings. This increase in supply can impact market dynamics significantly. A sudden oversupply of properties could potentially soften prices, as buyers have a wider range of choices. Conversely, if buyer demand continues to be strong, this oversupply could be absorbed without significantly impacting prices. This annual cycle, coupled with the current market uncertainty, further complicates the decision-making process for vendors.
Given the current uncertain market future, vendors should not wait to transact. The market today is swayed by media narratives, economic factors, and property data that project different outcomes. This confusion could create opportunities for vendors who decide to act swiftly.
Lawless suggests that the current market conditions could be influencing a broader perception that the market has bottomed out, making it an opportune time to buy. This sentiment, backed by the potential end to the rate hiking cycle, may offer sellers an advantage at the negotiation table.
Moreover, the increasing demand from migrants for housing and investment properties is a driving factor for property prices, construction growth, and investment opportunities. Despite the challenges, this demand could help vendors get ahead in the market.
Uncertainty can be daunting, but it should not paralyse action. While we navigate the current market’s unique position, vendors have the chance to seize the opportunities that this uncertainty presents. Waiting for a clear market direction could mean missing out on these opportunities.
It’s essential to note that selling in the current market presents unique opportunities. Transacting in a down market at the same level means that changeover costs, such as stamp duty, are reduced, providing a financial advantage to sellers. Moreover, those looking to upsize can reap significant benefits in the current market conditions. If the market continues to slide, sellers can take advantage of further upside on their next purchase.
Selling a property does not exist in a vacuum. It’s often a precursor to buying another property. Therefore, the financial implications of selling in a down market extend beyond the selling price of the current property. They also relate to the potential value and cost of the next property. In a downward market, the price gap between lower-end and high-end properties tends to shrink, making it an opportune time to consider upsizing. The cost difference may be less than in a booming market, making the move more financially achievable.
On the purchasing side, buying property now ensures that you don’t miss the potential upswing. While short-term market fluctuations may cause concern, it’s important to remember that the long-term trajectory of the property market has historically been an increase in value. Real estate is generally considered a safe and reliable long-term investment. Buying now can safeguard against the risk of being priced out of the market if prices rise significantly in the future.
Regardless of market conditions, owning a property serves more than just an investment purpose. It’s a place to call home, to raise a family, and to create memories. These intrinsic values are immune to market fluctuations.
Furthermore, purchasing now allows buyers to take advantage of historically low-interest rates. While they are slightly above average, they remain relatively low in the grand scheme of things. Buyers can lock in these rates, reducing their long-term financial burden.
While uncertainty might be the watchword for the current Australian property market, it’s also a time of unique opportunities. For those who have the financial means and are not looking for short-term gains, buying or selling property now can offer significant long-term benefits. As always, each individual’s circumstances are unique, and it’s important to consider personal financial situations and goals before making any decisions.
In conclusion, the property market is a complex and dynamic entity, swayed by a multitude of factors. Amidst the current uncertainty, vendors are encouraged to make informed decisions and act now rather than wait.
References:
CoreLogic (2023). CoreLogic Home Value Index: Further evidence Australia’s housing downturn is over.
BrokerNews (2023). How will higher immigration affect the property market
Available at: https://www.brokernews.com.au/news/breaking-news/how-will-higher-immigration-affect-the-property-market-281973.aspx
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Nathan Simpson
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