Confused? You're not alone!

Are you finding it hard to work out what the market is doing and where it’s headed? 

You’re not alone!

All conversations around real estate at present involve confusion and uncertainty; fueled mainly by inconsistent selling and guide prices.

The recent, numerous interest rate increases were expected to slow down not only inflation but property prices as well, as mortgage repayments increased significantly for many. So far there has been relatively little change, leaving punters questioning their next move. Despite inflation ticking up again in August, the RBA decided to keep rates on hold yesterday for the fourth month in a row. The central bank underwent a changing of the guard during this time and that could have led it to approach their decision with more stability than usual.

An interesting observation that we have made in recent months is the somewhat erratic sales results. Good quality property is selling better than expected and more run of the mill property is struggling. Healthy auction registration and clearance rate figures are being recorded as a result of the comparatively greater interest in so-called A-grade stock pulling the overall numbers up.  

The current trend with buyers is an increase in owner-occupiers and a drop-off in investors. Investors traditionally base their purchase on commercial considerations and if the number don’t stack up they are not interested. The changes in interest rates and the stabilisation of rents seems to have led investors to reconsider their strategy and offload property. Likewise, there are less investors in the marketplace looking to buy, which has decreased demand for this category of property.

Conversely, the demand for good homes for families and the like has increased, and with this buyer pool making purchasing decisions heavily laced with emotion, it is no surprise that prices have held well under the pressure of increased costs.

Another observation is that short-term resales have been on the rise. These can be the result of house flipping for capital gain, or work or family situations changing. Given the current interest rate environment, mortgage serviceability could also be contributing to this property pool. Furthermore, costs associated with buying and selling property make it unconducive to trade often. However, periods of strong capital gain can be associated with short-term reselling because the seller can realise a strong profit which can offset high transactional costs or might be put towards buying a higher quality property.

With consumer sentiment remaining flat, it is little wonder there is uncertainty in the marketplace. Financial pressures are starting to impact disposable income and the likelihood of another rate rise is playing on peoples’ minds. But with demand remaining strong in the inner west, we are unlikely to see significant price drops in the area in the shorter term so if you’re waiting for prices to come down, you may be waiting for some time.