Come the end of December, another Christmas will have passed and we’ll be looking expectantly into the New Year – and hoping for the miracle of second sight about the property market. And this happens every year.
What can we expect over the Christmas period? Contrary to what some may suggest, people do buy – and sell – homes at Christmas time; and, in fact, throughout December and January regardless of the distractions around seasonal celebrations.
First, what did we see as we moved through the 2022 property market?
Price growth continued, the high-end market continued to perform strongly, the shift to regions slowed a bit but not entirely, southerners kept flowing north, the CBD’s started to pick up around the country, the construction industry started to get on its feet again, and rents soared. If you could find a rental!
Signalling a cooling market, which I call as a correction back towards normal market conditions, properties are taking longer to sell on average compared to the same time last year. The average property in Australia now takes 36 days to sell, compared to just 20 days over the three months to November 2021.
Market commentators and analysts get it wrong more often than not. I don’t blame them… no one really knows which way the market will go. Remember back in early 2020, almost everyone was predicting a major crash due to the pandemic? Some said a drop of 20% or more. Instead, we saw record annual price growth.
Simon Pressley, Propertyology, points out that house prices tripled in the past 20 years in 144 locations across Australia, through two decades that included a Global Financial Crisis, eight prime ministers, a national credit crunch and the COVID pandemic.
What might we see for 2023, remembering that market forecasters have an even harder job than weather forecasters?
With the current state of our economy and property markets in general, there is no reason to suggest a major crash.
Each state is at its own stage of the property cycle. There are multiple markets within each capital city – some have falling values; some are flat and some are even rising still. There are markets within markets: houses, apartments, townhouses and units in outer suburbs, middle ring suburbs, inner suburbs and the CBD.
Interest rates are rising, but they’re only one of the many factors that affect home prices.
Let’s look at what’s happening. Despite rising interest rates, they are still only getting to where they were in pre-pandemic times. There are plenty of jobs to be had. I don’t think the RBA, the lenders or governments want to see a housing market crash and would rather support mortgage holders.
There is a shortage of good properties for sale and virtually no properties to rent. International immigration is bound to increase the demand for housing. Not enough new dwellings are going up. Government incentives encourage first-home buyers into the market. Wages are starting to grow, and we’re told that household balance sheets are strong with many borrowers ahead in their mortgage payments.
Rising inflation and cost of living mean a deposit is harder to save, and buyers are not able to borrow as much as they could when interest rates were lower.
However, if you are in a financially sound position, act while others are sitting back watching and waiting. ‘Zig’ when others ‘zag’. Be the savvy buyer who moves in a different direction to the crowd if you can. Act when there’s less competition and you have more time to conduct your due diligence and research.
Look for infrastructure improvements when you are considering a market. These things improve employment opportunities, transportation and lifestyle options.
Access to public transport is a key driver of property prices and in Brisbane, for example, suburbs like Rocklea and Salisbury are likely to have increased appeal. Other areas that may benefit from infrastructure investments and upgrades between now and 2032 include Redcliffe Peninsula, Inner South (the Olympic Precinct), North-East suburbs and Logan City.
The pandemic turned the spotlight on the importance of living in the right type of property in the right neighbourhood. Lifestyle and destination suburbs where there is a wide range of amenities giving people the ability to work, live and play within a 20-minute drive, bike ride or walk from home are likely to be the better performers in the future.
