New data on Australia’s residential sales indicates the conservative nature of the market continues: and that holds lots of potential for owners looking to upgrade.
The price focus that’s gripped media and industry researchers misses an essential element of buying real estate: the discount gain upgraders enjoy when they sell and move higher on the property ladder.
Right now, the market favours upgraders, and here’s why: if you sell at a 10% discount on your $500,000 property, you’ll be adrift $50,000. But when you snare that $1 million dream home at the equivalent discount, you’ll save $100,000. Which means overall, you are ahead.
Prices are relative, so the last Home Value Index of the year issued by CoreLogic should be seen positively by upgraders.
Of course, until inflation returns to its 2% to 3% range, estimated by mid-2024, mortgage costs will remain a factor.
These are some highlights of the CoreLogic report:
- Residential prices are down an average of 7%, or $53,400, from their April peak.
- Values previously surged 28.6%, or $170,700, during the pandemic.
- Price falls are tapering, down 1% in November compared with 1.6% in August. Melbourne and Sydney are influencing this moderation. The speed of value falls also eased in Canberra and Brisbane.
- Brisbane and Hobart (both -2%) led the monthly rate of decline in November. Perth and Darwin were at 0.2%.
- Capital city unit values are -4.7% off their peak. House values are down -8.4%. Sydney is the only city to suffer a 10%-plus drop, but it also enjoyed a 27.7% rise when the market was running hot.
- Price declines may accelerate if the Reserve Bank continues to hike rates, as it did in early December. However, it has indicated a reluctance to continue, fearing a recession if it goes too hard. The market may respond negatively when record-low fixed-rate terms, secured by owners in 2021, start to expire. Most of these loans were set for two to five years and are estimated to represent a third of all loans.
- The supply of homes for sale remains thin, which has helped fortify prices.