Are We At The Bottom?
In This Weeks How's The Market | Edition 38
Are We At The Bottom?
Agents Are Struggling To Get Listings
Investors Are Cashing Out
Are We At The Bottom?
Economists, property experts and the media are currently divided into two schools of thought about what is happening in the property market right now:
We are in the eye of the storm and we are about to experience a further significant drop in property prices.
The worst is behind us and property prices will remain stable until we see a drop in interest rates or a change in lending policy allowing for increased borrowing capacities.
My feeling from seeing how the market is moving on the ground is that the second option is more likely to be true. Here are a few reasons why I believe this to be the case:
1. RBA boss Phillip Lowe has signalled the RBA is close to pausing interest rate hikes.
After interest rates stop rising, buyer confidence should begin to pick back up in the market as more short-term stability is provided.
2. Rolling monthly data from CoreLogic shows that house prices in Sydney, Melbourne and Perth all rose in February.
Brisbane and Adelaide have still both experienced declines, though overall the rate of decline has completely flatlined.
3. Overseas migration in Australia is forecasted to be over 300,000 people in 2023, 25% higher than Treasury forecasts.
Whilst traditionally most migrants will rent for the first couple of years upon arriving in Australia, pressure in the rental market may drive more migrants to purchase homes sooner putting more pressure on property prices.
4. The rental crisis is showing no signs of recovery.
Unfortunately, there are still very few signs that the rental market will recover anytime soon. In fact, many investors are currently selling investment properties to help them deal with the financial pressures of rising interest rates, cost of living and increased rental compliance costs that were introduced in 2021 with more than 5000 rental properties hitting the market over the last 3 months. This is taking away 5000 rental properties from the available pool for renters nationwide.
5. Consistently low stock levels are keeping demand high, asking prices steady and auction clearance rates solid.
On the ground, we are seeing large groups going through open homes and competitive bidding on auctions. One property we secured recently had 7 offers on it with every offer coming in well above the range.
Does this mean house prices will now rise?
Not likely.
Inflation hasn’t been brought under control yet and interest rates dropping are still a long way away.
The next phase of the property market will likely be stabilisation with property prices remaining consistent for the remaineder of the year.
Could the property market drop further this year?
Absolutely.
If there was an event or dramatic shift in sentiment which causes listings to increase by 20% - 30%, there would absolutely be a further drop in prices as demand catches up, though it appears this outcome is unlikely.
What The Agents Are Saying
In the south east and outer eastern suburbs agents have been stating that very low stock levels are keeping the markets moving fast. Many agents have said they have noticed an increase in numbers of people through their opens over this same period.
The Geelong markets on the other hand seem to be slowing down. Whilst their prices are yet to drop they are noticing very few numbers through their opens and days on market is starting to rise in the northern suburbs.
The Wow Factor!
14 Rosedale Road, Glen Iris, Vic 3146
This facade is certain to catch a second look as the charred timber battens create privacy whilst letting in natural light.
Price Guide: $7.3m - $8m
In The Media
Investment properties on the chopping block as rates rise
This is something that we are 100% seeing on the ground and whilst talking to agents. Many investors are either cashing out from the large rises in equity they would have achieved over covid or selling down debt to avoid the worst of the interest rate increases.
Increasing the compliance and cost of maintaining investment properties is also deterring some investors from holding assets.
Final Thoughts
Sentiment feels a lot more positive across the board from conversations with agents to brokers and buyers. Though we still have a long way to go. If interest rates stay where they are in April, I believe we could see a further increase in demand and supply which would be a strong signal that we are moving into the stabilisation phase of the market.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
