Introduction: Mixed Messages
The property market is sending out some mixed messages at the moment, with buyers and sellers getting confused about what’s happening. In this article, we’ll take a look at why this is happening and what it means for you. It’s no secret that the property market is in a bit of a state at the moment. Prices are down, sales are down, and everyone seems to be feeling a bit uncertain about what’s going to happen next. But why is this happening? And more importantly, what does it mean for you? Well, there are a few different reasons for the current market volatility. Firstly, there’s been a change in government, which has created some uncertainty about the future. Secondly, we’re seeing the effects of changing consumer behavior, as more and more people choose to rent rather than buy.
As Australia nears the conclusion of the spring selling season, mixed messages from a two-speed property market have left buyers and sellers perplexed.
While six straight interest rate increases have led median house values to decrease throughout the country, certain cities are faring better than others, and a few suburban enclaves within those cities have either remained solid or bucked the broader trend entirely with surprising price gains.
Meanwhile, apartments outperform homes, regions outperform cities, and investors are debating whether now is the time to enter a bottoming market or sell to secure good capital gains gained during the Covid boom.
Prices are down… but they’re also up
A few days after the Reserve Bank of Australia’s most recent official cash rate hike, and terrifying media stories showing precisely how much more homeowners on variable rate mortgages will be paying, Sydney – the Australian market’s barometer – celebrated another Saturday of sales.
The clearance rate of 52% was low, especially when compared to clearance rates of 80% or higher recorded a year before. Was it, however, all terrible news?
The auction of a two-bedroom renovator’s delight in inner-west Earlwood drew 34 bids, with the final price of $1.27 million considerably above the estimated price of $885,000.
A tired-looking property in Concord, also in the inner-west, went for $2.2 million, $155,000 above its reserve, after a bidding war between 11 buyers. In inner-city Darlinghurst, a neglected old terrace sold for $2.9 million, $500,000 more than its reserve.
While the PropTrack Home Price Index for September showed a 0.22% drop in national home values, with Sydney (down 0.25%), Melbourne (down 0.27%), Brisbane (down 0.24%), Perth (down 0.32%), and Darwin (down 0.55%) all reporting dips, capital city prices remain 25% higher than pre-pandemic levels.
Prices in the southwest Sydney’s suburbs of Liverpool, Canterbury, and Bankstown saw a mini-boom in September, rising by 6.99%, bucking both the city and national trend. Simultaneously, the Campbeltown region to the south and west increased by 5.82%, while the city’s outer western suburbs and the Blue Mountains increased by 5.78%.
It was a similar tale in Melbourne, where price hikes of 4.39% were recorded in suburbs such as Dandenong, Moorabbin, and Box Hill. Footscray, Keilor Park, and Williamstown in the western suburbs increased by 4.19%. At a national level, there are headwinds owing to the RBA hiking rates, which is hitting property everywhere, PropTrack analyst Angus Moore said.
Not everyone will be affected in the same manner – some properties will do better than others – but everyone will be laboring against that headwind. There are a few significant variations this year, and some of them are a continuation of what we observed at Covid. People desire more space, which is expressing itself in the city’s outer suburb pockets, and affordability, due to limited borrowing power, is also sending people to those outer places.
A new experience for many
The RBA is primarily to blame for the present market turmoil, having pushed hard on the interest rate lever when inflation began to rise, despite prior warnings that rates would likely continue at record low levels far into 2024.
And, for a whole generation of purchasers and homeowners, the dramatic rise in interest rates has been an entirely new experience.
“There are a few contradictory mixed messages out there, and I believe a lot of buyers have been sitting on their hands simply waiting to see what happens with interest rates,” Pete Wargent, co-founder of national buyer’s agency BuyersBuyers, said.
Is it the right time to buy?
Buyers attempting to manage present circumstances should keep a careful eye on wider economic variables that may affect markets in the coming years.
I would definitely start moving if I was purchasing in New South Wales, Mr. Wargent said. In January, first-time purchasers will be exempt from paying stamp duty. Sydney has seen the greatest price drop, implying that it will be the quickest to recover.
According to Mr. Wargent, there is evidence that a key trend during Covid, of people leaving large cities to go to the provinces, is starting to reverse. There’s also a bit of a reverse going on in that people are relocating out of the Bendigo and Ballarat’s and back into the city, he said.
So, when you combine that with foreign students returning and permanent migration heating up, I believe there will be a lot of demand for Sydney and Melbourne in the future years.
Mr. North, who feels that choices made by investors, downsizers, and those forced to sell as repayments spiral are contributing to market instability, also believes that purchasers must do their own research before making major life-changing decisions regarding property. You have to be picky and willing to conduct your own research to uncover such prospects, he added.
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