July 6, 2022
Global viruses, wars, energy crises, floods, high costs of living: there are not many dramas we haven't experienced in the past few years - and our property market is no exception.
You're not alone if the extraordinary price rises, rental vacancies and record-high rental prices have your head spinning.
Yet recent signs are showing we're heading towards a buyer's market - or are we?
Six months past the worst of COVID (cross fingers) yet still struggling with high costs of living including inflated energy bills, our property market is starting to change too.
Sydney and Melbourne were the first capital cities in the country to record house value falls with Sydney experiencing monthly value declines since February while Melbourne's house values fell across four of the past six months, according to CoreLogic's monthly Home Value Index (HIV) report in June.
The report also stated that in May, Canberra recorded its first monthly decline since July 2019.
CoreLogic believes such falls are a combination of rising inventory levels and low consumer sentiment along with higher interest rates, which the Reserve Bank of Australia began hiking up for the first time in a decade in May.
This hike continued this week with the cash rate now at 1.35% and it's expected to continue to rise for the remainder of this year, and possibly into 2023.
Headlines are now warning us that house prices are plummeting but the last thing we want you to do is panic.
Let's look again at the above-mentioned CoreLogic report.
Yes, Sydney house values were down 1.5% in May with Melbourne's values down 0.8% and Canberra's down 0.1%.
However, even with this drop, Sydney, Melbourne and Canberra's current house values are 22.7%, 9.8% and 37.9% respectively above that of their pre-COVID years.
The last year alone saw the median value of North Sydney homes shoot up 38.18%, and 10% in the past decade, according to Smart Property Investment figures, while Melbourne's median values rose 18.94% to $1,843,500 in the last 12 months.
We think that's not too shabby and we hope you do too.
Also, in Michael Yardney's words, there isn’t just one Australian property market or even just one city's property market.
"Every market in every area is segmented, and prices in some of these segments will outperform going forwards, while others will not," Mr Yardney explained.
A buyer's market is one where you've got more affordable real estate with more of them on the market for longer than is wanted by potential buyers.
So, where are we at with house values and availability?
As CoreLogic's research director Tim Lawless sees it in the industry expert's latest HVI report released this week the housing market is seeing a sharp decline in house values.
Add to that increasing interest rates, a high inflation of 5.1%, low consumer sentiment and fewer property purchases, and the market is now swinging back in favour of buyers as housing conditions slow, Mr Lawless explained.
"Every capital city and broad rest of state region is now well past their peak rate of growth as trend rates ease across the remaining markets," Mr Lawless said.
He added that continued high inflation and rising interest rates would see a continued decline in housing values with the report stating the market will become "increasingly skewed to the downside".
But note that we are only "swinging back" to a buyer's market and not plummeting or crashing into one without warning.
As well, only Melbourne and Sydney's houses declined in value in the June quarter while in June itself, this decrease was only 1.6% and 1.1% with the remaining capitals virtually untouched by such depreciations.
"CoreLogic estimates home sales nationally through the June quarter were 15.9% lower than a year ago - but they're still holding 13% above the previous five-year average," the CoreLogic report stated.
Mr Lawless added that there were no signs of panicked property selling but more, a slow-down of new listings on the market.
We are moving towards a buyer's market but slow and steady really does seem to be winning this race - and there's also more to the basic buyer's and seller's market question than meets the eye.
While rising interest rates are a key component of the current market panic, Mr Yardney said such rises weren't unusual in an upturning property cycle and they were still comparatively low - think Australia's record-high cash rates figure of 17% in 1989.
Mr Yardney believes these rates are therefore actually making it easier to own a home, either as an owner-occupier or investor.
He added that people now stressed about mortgage repayments should remember that rates would most likely end up where they were two to three years ago: "and we weren't troubled by mortgage stress then."
As well, Mr Yardney said anyone who bought a home during the COVID years would have done so based on conservative banks' serviceability checks of 2%-3% rates.
He explained other important points to keep in mind were that most recent buyers already had significant equity and the majority of Australians had built up a large amount of savings since 2020, with more than half of mortgage holders paying their mortgage months in advance.
The rental crisis also meant investors were now enjoying higher rent.
"Inflation and high-interest rates are a concern when unemployment creeps up and people can't pay their mortgages - but that's not the case at present," Mr Yardney said.
"Our economy is growing strongly and anyone who wants a job can get a job."
We at Listing Loop certainly want to encourage you to see things in a relative light and to realise that the current property market is not all about plummeting prices, values and stock availability.
Importantly, you do have options when it comes to buying and selling, the best of which is buying - and selling - off-market.
So, if in doubt about any of your home buying plans, sign up at Listing Loop or download our app.
Our off-market and pre-market marketplace give you VIP access to properties so you can get in first.
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