Real estate prices displayed considerable resilience in 2024, but the burning question now is whether the supply and demand equation will keep values buoyant while we all wait for the much-promised and delayed interest rate cuts.
Predicting when rates might fall from 4.35% is like playing roulette. With so many economic and geo-political factors in play, who’s to say where the ball will drop when the wheel stops spinning.
Fears of higher inflation from threatened US trade tariffs applied to our trading partners, particularly China, could damage our own economy.
Putting outside factors aside, our market has been racing along at three speeds in the past 12 months. Melbourne has been in decline (-2.3%) while Sydney has been flat (+0.1%) and Perth booming (+21%), with Adelaide and Brisbane not too far behind.
According to Proptrack, the REA Group’s data company, our median house price is now $800,000, so affordability continues to be an issue for many, especially first homebuyers and upgraders.
One market feature of the last few months has been the tsunami of properties coming onto the market to catch the so-called spring and summer sales seasons.
The boost in supply has returned momentum to the buyer. While there has been a pickup in transaction numbers, many sellers have struggled to meet their price expectations.
That’s not entirely bad news. For example, it will get a thumbs up from first homebuyers, investors and upgraders.
Why upgraders? While they might not have hit their own price ambition when selling, they should have taken advantage of the favourable buying conditions.
In effect, their savings on a home upgrade should have outweighed the discount when selling their smaller home.
Below are some tips for how to approach 2025:
Fixed Rates: With interest rates surely set to fall – either in February or the middle of 2025 – now is not the time to lock yourself into a fixed rate. Watch the financial markets carefully before making a decision.
More Time: It’s likely properties will spend a little more time on the market. So, be patient and don’t panic.
Presentation: For a successful sale, it’s critical the presentation of your property is five-star quality. There’s always a buyer for a well-presented property. So, don’t rush into the market if you can spend a little more time giving your home extra sparkle.
Day of the Downsizer: Babyboomers will be looking to downsize in increasing numbers in 2025. They’re now 2.15% of the population, or 5.6 million. Demand for downsizer housing is going to become an increasing issue from 2025 onwards. On the upside, that’ll increase the number of family homes for sale.
Tale of Two Cities: For investors, many pundits think 2025 is the year to buy in two struggling markets – Melbourne and Darwin. Check out the income-to-asset-ratios before making a decision.
Risky Business: Be aware the protection buffer to ensure lenders don’t get overly generous has changed. The Australian Prudential Regulatory Authority (APRA) increased the threshold from 2.5% to 3%. While it did that three years ago, most buyers might not be aware of this new threshold.