The real estate rollercoaster!

If you have ever been on a theme park big dipper, you wouldn’t be blamed for feeling that the real estate market of the past few years has felt like much the same ride.

What is going on and why is this happening?

It was mere months ago that housing values were dropping at the fastest pace on record. In May 2022 the RBA announced the first interest rate increase of many, and what followed was that values plummeted more that 9% in around 10 months. It felt like the emergency brakes were activated and the market, that had been flourishing in the preceding months, came to a virtual halt.

Whilst the rate of decline eased, there wasn’t much hope or indication that the market would pick up any time soon coming into 2023. But, as had been happening throughout the previous years, market behaviour surprised us again. By mid February there was a palpable uptick in buyer activity as they felt the end of the rate increase cycle was nearing and they grew out of patience waiting for the market to “bottom out”.

However, sellers were unmoved and the result has been a significant shift in the supply/demand ratio resulting in stiff competition for property and above expectation results.

Currently, the national volume of homes listed for sale is 28% below where it should be at this time of year. The winter months traditionally track lower numbers of properties available for sale so competition between sellers is seasonally a lot higher than usual. This is resulting in high auction clearance rates, lower days on market and less haggling, resulting in sale prices that are reminiscent of a more booming market.

And, why is this surprising? Because diminishing housing affordability is imposing more financial pressure on individuals and families and yet the impact has been masked by the limited availability of property to buy. Furthermore, the last obligation that borrowers will default on is their mortgage repayment. To defer any risk of being unable to meet their repayment, they will reduce spending on discretionary items and use any savings they have to meet the deficit.

The second half of this year is where we will see the real state of the market emerge. Not only will we have the customary uptick in stock volumes in spring - which will increase supply - we also have many mortgage holders coming off fixed-term mortgages who will be thrust into a new repayment schedule that may prove to be prohibitive. Current market conditions are also creating a sense of urgency amongst buyers as they fear they will miss out on the few properties available to potentially call home. With the increased supply we are bound to see the supply/demand ratio shift once again with an easing of prices and increased disappointment amongst sellers.

On the ground

Auctions were very animated last week with over 5 registered bidders at each auction I attended. The majority of those made at least one bid creating competition and resulting in good auction clearance rates and robust sale prices.

As we know, spring is often regarded as the peak selling season but remember that your competition when selling your property is other sellers. Every day can bring another property on the market so why wait? If you are thinking of selling, my strong recommendation would be to prepare now.