Finally the media has started to catch on that prices are on the rise after a short decline.
In last months newsletter we indicated we were already in a rising market and had called the bottom of the market months ago at the end of 2022.
The signs have been everywhere, stock levels have been low, clearance rates have been picking up and we have seen competitive bidding particularly for high quality properties with reserves being smashed and new records being established.
Yes we still have the cost of living crisis and interest rates that have increased for 10 consecutive months. But inflation is dropping with the headline rate decreasing from 8.4% in Dec 2022 to 6.4% in March 2023. So we may move to a cycle of stabilisation for interest rates and even potentially decreases before the end of the year or into 2024. While interest rates are going to remain higher than they were during covid, the certainty it provides to people once you come to an end of an increasing cycle this gets people motivated to move again with their property purchases.
But for anyone that has been sitting on the sidelines and waiting for the bell to ring to tell you the market is moving, the most recent announcements around migration into Australia over the next 2 years, should do it. Australia is set to welcome 1.3M new migrants into Australia over the next 2 years. This will put enormous strain on the rental market as well as housing prices as the demand for property is likely to boom. With supply already low and demand set to increase there can only be one direction that prices will go and that is up.
Indeed even the pessimists only a month ago that were calling a dead cat bounce with the slight increase in prices in January are now suggesting boom conditions.
Leith van Onselen co-founder of MacroBusiness.com.au and Chief Economist at the MB Fund and MB Super wrote on the 30th March an article for sky news stating;
2024 is shaping up to be a boom for prices, given:
– The RBA is likely to cut interest rates, which would lift borrowing capacity;
– The Australian Prudential Regulatory Authority is likely to follow suit by reducing the 3 per cent mortgage buffer, which would further boost borrowing capacity;
– Australia will continue to experience rapid immigration;
– The rental market will tighten further; and
– Housing construction will be depressed, given high construction costs and widespread builder insolvencies.
There is genuine demand in the market. The only thing holding prices back is high mortgage rates and their impact on borrowing capacity.
Once that constraint is removed, you have the ingredients for the next house price boom.
So our advice would be if you are in a position to buy it would be wise to enter the market now rather than wait until Fear of Missing Out (FOMO) sets in and you are trampled by the herd desperate to get into the market.
Insights
Source: Corelogic March 2023
CoreLogic’s research director, Tim Lawless, said the stabilisation in housing values over the month coincides with consistently low advertised supply levels and a rise in auction clearance rates. “The past four weeks have seen the flow of new capital city listings tracking -17.0% lower than a year ago and -11.9% below the previous five-year average,” Mr Lawless said. “This trend towards a below average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline.” Auction clearance rates also bounced back through February, with the capital city weighted average reaching the high 60% range through the second half of the month, while Sydney clearance rates rose to above 70% in the week ending 19 February, the first time since February 2022.
Each month the CoreLogic Research team puts together a Housing Chart Pack, with all the latest stats, facts and figures on the residential property market, such as the combined value of residential real estate, sales volumes, and the trend in new listings.
Here are this month’s highlights*:
- Dwelling values in Australia are -7.9% lower over the past 12 months, the largest annual decline on record.
- The combined value of residential real estate in Australia rose to $9.3 trillion at the end of February, from $9.2 trillion in the previous month but well below the peak of $10 trillion in April 2022.
- Despite a large annual decline in home values, the monthly pace of decline slowed quickly over February to just -0.1%.
- The highest annual growth rate in dwelling values among the regional and capital city dwelling markets was across Regional SA, at 13.2%. The lowest change in values was across Sydney, where home values declined -13.4% in the past year.
- The rolling 28-day change in the combined capitals home value index was 0.0% in the 28 days ending 7 March.
- Sales volumes continue to trend lower as buyer demand slows. CoreLogic estimates that in the 12 months to February, there were 486,620 sales nationally, down -21.2% compared to the previous year.
- At the national level, properties are taking longer to sell. In the three months to February, the median days on market was 41, up from a low of 20 days in the three months to November 2021.
- Vendor discounting also expanded through 2022. However, in the three months to February, the national median vendor discounting rate contracted slightly on the three months to January.
- In the four weeks to 5 March 2023, the volume of new listings totalled 38,479 nationally. While new listings have seen a seasonal lift, new listings are still -12.7% lower than the previous five-year average.
- The combined capital cities clearance rate averaged 65.8% in the four weeks ending 5 March 2023. While this was a much stronger result than in the final weeks of 2022 (averaging 55.1%), auction volumes are still low relative to where they were this time last year.
- Annual growth in rent values held steady on the previous month in February, at 10.1%. Annual growth in Australian rent values was 10.2% in the 12 months to December, a record high. The most rapid annual rise is evident in unit rents across Sydney, Melbourne and Brisbane, where rents have increased around 14 to 17% annually.
- The chart of the month shows a turn in the tide of supply for Hobart. Monthly listings volumes are 73.4% higher than a year ago, as properties take longer to sell, and listings volumes move toward the decade average.
*Data is to the end of February 2023 unless otherwise specified.
Property Management Update
Welcome to the rain and the end of daylight savings!
The rental market is still moving fast. We are noticing that properties in the median price range are attracting large numbers of potential renters through them however, higher price ranged properties are staying on the market a little longer.
We are being contacted by potential renters asking us if there is anything that they can do to stand out / be considered for a property and we advise them that the first thing is to physically attend the scheduled inspection. Once you have viewed the property, submit your application immediately ensuring that it is complete. Its is also a good idea to let your references know to expect contact from us so they can action the reference requests promptly. Given how competitive the rental market is at this time, it is imperative that you do all that you can to ensure that your application is presented to the owner for consideration. Applications that are not complete or references that can not be confirmed are simply being left behind as are those who miss the open homes. It’s a competitive market for potential renters and we hope that this information assists.
If you are unhappy with the level of service you are receiving from your current Property Manager, have a chat to Rachel or Liz. It may be time for a change. If you would like a confidential chat, please contact us (03) 9818 4499.
Property Purchases
Although supply has been very low we have continued to deliver great results for our clients. Here are a few below:
Upsizers – Caulfield North
We were engaged by a couple that lived around the corner in a single fronted property. They were looking at either renovating or buying a double fronted property. This property ticked all their boxes and were ecstatic when we were able to secure their dream home at a price they were extremely happy with.
1st Home Buyer
A very challenging criteria in that the client wanted a property on a bit of land for mid $400k’s. We came across this property in Boronia and while it needed a bit of work, it was 1 of 2 on the block on over 200 sqm of land and within walking distance to the train station. This was bought through private negotiations and well below the vendors initial expectations. A happy client who is now on their home ownership journey.
Downsizer – Hawthorn
This property was purchased at auction. This one had people standing in the forecourt of the block anxiously waiting for things to happen. The crowd, certainly looked like they were there to bid. Surprisingly no. The Auctioneer opened the bidding up with a vendor bid of $1,020m to which another party responded with a bid of $1,030m to which Buyers Advocate promptly responded with another $10k. From here the bidding stalled. The property was formally passed in, to Buyers Advocate to negotiate exclusively with the Vendors. With an inflated reserve price of $1,150,000 Buyers Advocate managed to secure the home and walk away with the keys for $1,090,000. Another happy client.
Tip Of The Month:
Do knock out bids work at auction?
A very interesting situation happened at an auction in Hawthorn East on the 25th March. During this auction, a bidder conducted a ‘knock out’ bid. The bidding was at $2.34M and bidding had slowed to $5k increments when a buyer decided to up the ante by $160k and secured the property for $2.5M! What is a ‘knock out’ bid and do they work? A knock out bid can be an excellent strategy if the competition is sticking to smaller increments of $1,000 or $5,000 in their bidding. Coming in with a stronger bid that is above the increments of bidding can shake the trees. For example, a $10,000 bid when the increments are going up by $1,000. This psychological move may cause the other bidder to not continue with their smaller increments. It shows a position of strength. Auctions can be very intimidating so this strategy can deliver great results. BUT this strategy does have issues if you are inexperienced. The $160k today may have been overkill while a smaller bid of $20k or $30k could have had the same effect saving significant $$. Like anything: do your due diligence, ask questions about your likely competition, have an idea of where the reserve is likely to be, and know the value of the property. Emotions and stress hinder sound decision-making skills. We professionally use strategies and tactics to successfully acquire your ideal property for the minimum possible price.
Want more tips on buying property at auction?
Visit https://bit.ly/8EssentialActionsToBuyProperty to download our guide.
