This month I am celebrating 34 years in property with 24 of those spent as a buyer’s advocate. If I may be self-indulgent for a moment, I have distributed regular newsletters over that time with forward predictions on where I thought the market was headed with regular accuracy. This coming quarter however is a hard one to comment on with any confidence due to so many outside influences.
Firstly, you have the RBA running rogue with interest rate rises and not taking the time to reflect on what 5 consecutive rates hikes have achieved thus far. Now the announcement of yet another increase albeit half of what many predicted which would suggest the aggressive approach from May must be impacting inflationary habits. The interest rate rises to date seem to have had little effect on spending thus far but the real estate market has shown signs of stabilising after losing ground since its peak in October 2021. We know rates should have increased earlier in the year and by lesser increments. Now borrowers with a $750,000 mortgage need to find an extra $2,000 a month pre-tax to keep in step. Hopefully the Reserve Bank will sit the remainder of the year out and observe the effects of 6 increases, leaving any additional increases until February. I doubt you will curb household spending in the lead up to Christmas.
The extent of the war in Ukraine is unknown and its further influence with the European Central Bank coping with inflation at 9.1% and natural gas having increased 12 times what it was pre-invasion. However, we need not follow the UK and USA ‘s aggressive approach on tax cuts and interest rate rises to find the right balance here in Australia.
Overall, the property market has shown strong resilience to COVID, the RBA, overseas influences and consumer confidence which has surprised most property experts. House prices in the inner city are still 20% above pre pandemic (2019) having declined approximately 8% since the peak of the market a year ago. Regional areas have fared best as they have witnessed an average increase of 40% against the capital cities 25%. Auction clearance rates within 20km from the city have been sound at over 60% and in the last quarter the market has dropped $36,000 from the median price. Insignificant really. New listings in the 4 weeks to September are higher in the equivalent periods 2019-2021. Days on market have increased from 20 to 33 in the three months to August which is more than acceptable and overall buyers are down in volume 5%. This is encouraging for current buyers in the market.
I feel from here the market may well plateau for a time with another dip in the middle of 2023 when fixed interest holders grapple with an exponentially higher rate than where they locked in. Prices should then begin to appreciate in 2024. It is a buyers’ market and although prices may fall further, in the short term if you find your perfect home that you can afford – buy it and take the peaks and troughs in your stride.
Michael Ramsay
Principal
The Advocates