We are in interesting times in the current property market. There are external events that are causing concern, however, some things do remain constant
In the world of pandemics, conflict in Europe, and the reverberation of inflation and interest rate rises is there any wonder that sentiment and emotion have been in curbed in the property market. I hope your listening because this also presents some amazing purchase opportunities
The market has curbed from the heady heights of last year. Curbed in urgency, demand, and funding. The result is there are fewer buyers attending property inspections and even fewer ready to perform and purchase.
While great properties still maintain interest and competition, the levels of competition have slowed. The pressure valve released a bit and rightly so.
Another scenario now is the pricing expectation gap posing a problem for selling agents. Listings were acquired on the vendor expectation of the prices being achieved last year but faced with the reality of the market in this quarter and ongoing. A lot of their process is to bring market reality back to a vendor so that they see the market realistically. The inability to close this gap and slowing momentum is exampled with longer days on market, properties not achieving reserve at Auction, and an increased number of properties being sold off the market.
Can it turn this quickly? Yes – it is about sentiment and confidence in all markets. Will it change? – time will tell. However, momentum has slowed. Property is not like the stock market it is not as liquid and things take time to have an impact however it is a monolith and takes time to ramp up, wind down, and stabilise. All part of a historical property cycle. Property doubles in value in Sydney in under ten years in the past, but will it do the same in the next ten years?
One thing is for sure the average person does not get this leverage anywhere else. A bank provides funds that will leverage your deposits by 70% – 90% giving you money and purchasing power you never would otherwise have. Your home provides shelter and by way of a mortgage (forced savings plan), you enjoy equity growth riding on the bank’s shirttail. Your money (the deposit) has grown exponentially through the leverage and being able to control a multimillion-dollar asset for 10-20% of the price… provided you service your commitments.
The real value points of property have often been well exceeded in many instances, but logic doesn’t drive markets it is emotion and sentiment. With a continual historical lack of property supply (houses) to meet demand fuelled by a rising market driven by the Fear of Missing Out (FOMO), the cheapest money on offer in 80 years, and a change to urbanization and lifestyle living. A lot of average people have become millionaires with their home equity. Often selling the home locks in the equity and gives choices – further investments, downsizing, upsizing, moving to another area, having no debt, or strategically taking on more debt to improve their aspirations and lifestyle.
The drivers of property remain constant – the need for a home, close to work, birth, death, marriage, divorce, and downsize. Momentum can be driven by funding ability, employment, government stimulus, wage growth, sentiment, and desire for more room… especially highlighted in the pandemic.
In any market buying well is key. Timing will be different for individuals and for the broader market. However, if your timing suits buying a property take comfort that in the long run, you will be far better off if you can service your mortgage commitments. The market will always be transacting due to the drivers mentioned. In this market, there are still opportunities but also for those who are prepared financially and can be decisive in their decisions because the competition has weakened.
Being contrarian and moving against the crowd can have substantial benefits – for some, it is a great time to buy because their circumstance demands it, and in times of slowed momentum that can translate into savings and better property values and choices. Navigate the process, the market, and the value proposition cleverly…use a buyer’s advocate. Turn off Mute, act, and get decisive in acquiring your next property while others pondering.
You will save money.
3 Tips:
The 3 things that directly affect Australian property markets are:
* Housing Affordability (Cost of Housing, the mortgage expense versus household earnings)
* Interest Rates (The cost of borrowing)
* The availability of credit (Access & availability of money from lenders and what Loan to value ratio)
