Have we seen the peak?

Yes. The market is crazy. But is it showing signs of slowing down?

We are all hearing about the unexpected prices properties are selling for at the moment. In fact, March recorded the highest rate of national growth in the housing market since 1988. The pace at which home values have risen this year has left most of us perplexed and some even shell-shocked.

I have spoken about the reasons for the upswing previously – including record low interest rates, a resurgence in consumer confidence post the doomsaying of COVID-19 in Australia, shortage of supply, and additional stimulus measures provided by state and federal governments to incentivize home buying and building.

However, according to data released by CoreLogic, there are various signs that indicate the rate of growth may be slowing down and even plateauing.

1. Since late March, CoreLogic’s daily reading of home values has shown a clear and broad-based slowdown in the rate of housing value growth.

2. In the last week of March, clearance rates peaked at 83.1% and have since slowly declined. This is significant as auction clearance rates have a strong, positive correlation with housing values.

3. We have recently seen a lift in the number of new listings coming to market. However, overall stock is still lower than buyer numbers, with demand still outstripping supply. If this trend of rising vendor activity continues, and buyers start to leave the market via frustration or lack of FOMO, then we will see the supply/demand ratio start to level out and, in turn, price growth.

4. There has been a surge in new housing construction which will have a positive impact on supply. Approvals for new dwelling construction are at record highs and even though it will be some time until completion, the pipeline points towards a recalibration of the supply deficit.

5. Population growth has turned negative for the first time since 1916 due to closed borders and stalled immigration. At this stage we don’t know when the demand from immigrants will return as borders remain closed until the government feels confident that COVID is sufficiently under control. This decrease in demand has had a greater, more immediate impact on rental markets but the effect on property sales is still significant.

6. As the various governments start to pare down their stimulus packages, we could see an accompanying decrease in housing activity. Assistance such as the HomeBuilder grant and stamp duty concessions are due to expire, meaning housing demand could be negatively impacted.

7. Affordability, particularly for first home buyers, could prove to present a real obstacle to home ownership. Wages have not kept pace with the escalating house prices, precluding many home buyers from being able to raise the deposit needed to secure their home. As these buyers are forced out of the market, demand will drop.

Having said all that, there are also a handful of factors that will most likely maintain upward pressure on house prices.

The RBA has stated that the record low-interest rates we are experiencing will remain so until at least 2024. This, along with positive consumer sentiment due to our rapid economic recovery and apparent success managing COVID-19, will most likely keep housing activity and prices buoyed; just not soaring as rapidly as they have been.

If you are thinking of selling, now is one of the best times to start the conversation and planning. Our market conditions are unique right now and perfect to take advantage of.

We achieve our strongest results by following a proven strategy, tailor-made to your situation. Take the opportunity to gain from this advantage and my expertise and contact me now.

If, however, you or anyone you know would just like to discuss the current value of your home and the best strategy to get you the best price when you come to sell, you can contact me any time.

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Published August 24, 2021

By Belinda Cassano