Whether you’re buying, selling or just keeping a keen eye on the property market, you’ll be watching out for signs that indicate our stellar price growth is about to level off.
We haven’t seen such buyer exuberance since the late 80s, and even the most optimistic property expert knows the market will find its new equilibrium eventually.
That doesn’t mean prices will fall off a cliff but instead stabilise and/or continue to grow at a more rational rate.
As experienced agents, we’d stress that while there has been a remarkable increase in values nationally, the story for our area is dictated by buyer demand for particular styles of homes as well as available rental accommodation for investments.
We don’t have one huge property market in Australia but thousands of micro-markets. So, if you want to dig deeper into prices locally, please reach out and we can discuss recent results, sales volumes and buyer preferences.
In the meantime, here are a few tips for spotting when the boom is over.
1. The data – Leading industry researcher CoreLogic runs a Home Values Index. It’s the canary in the mine and provides a monthly update on how values are performing that receives broad media coverage. If that begins to level out, the market is returning to some form of normality.
2. Auction action – Some recent auctions have been pitched battles of bidding. But when an increasing percentage of property passes in, it means buyers are feeling more cautious. Clearance rates of 75%-plus indicate the market is still pumping. When clearance rates start dipping below 70% you know things are on the move.
3. Affordability – When residential property values outpace incomes – as they have in the past few months – then there’ll be a reckoning. If saving for a down payment feels pointless, a large proportion of prospective buyers will turn their back on the market.
4. Interest rates – The Reserve Bank promise that rates will remain low in the medium to long term has empowered buyers to service significant mortgage debt. The cash rate turning north would be a sign the boom is done.
5. Resurgent supply – A critical factor in this boom has been a lack of supply – ie: properties for sale. Many owners withdrew their properties from sale when Covid hit and kept a watching brief. Sales results of the last few months have lured them back into the action. With more houses and apartments available, competition among buyers dissipates and prices start to become sensible.
6. New buildings – Increasing the nation’s housing stock is vital to temper prices. CoreLogic says that in December, residential construction was up year-on-year 20%. That will have a small but meaningful impact.
7. Population exodus – Our national prosperity has long been driven by population growth. When more people leave than arrive, that’s bad news for our economy and property values. Because Covid has closed our borders, immigration is virtually non-existent meaning some of the pressure on the need for more housing is easing. It has been more than a century since we last experienced conditions like this but it can be very patchy in its impact. While overall population nationally may be stagnant or declining, many lifestyle and regional markets are experiencing unprecedented demand.