The property markets spring season is beginning to start up and all sellers and agents are getting ready for the first round of spring auctions on September 7. This means more new listing are hitting the markets but what does this mean for our cities capitals and regional markets across Australia.
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Firstly, how will recent changes make lending easier and impact demand and sale prices?
APRA has provided some sensible relief to banking guidelines, which had been strangling borrowers and relegating them to the sidelines because they either couldn’t get finance at all or they couldn’t get enough finance to fund their next move.
Will all those buyers held back in 2018 and 2019 try again, lead to more competition? It looks like it, with data from the Australian Bureau of Statistics for June showing a rise in new lending for owner-occupied and investment properties for the first time in more than a year.
Secondly, will the two rate cuts (so far) motivate people to re-engage this Spring, when more homes are available to choose from?
In Sydney and Melbourne, there’s a third test. In June and July, both cities recorded minor price growth for the first time since their peaks in mid-late 2017. Either the tide has turned or we are seeing the impact of a severe lack of stock, with sales volumes about 30% down.
I think the market has settled at its new level and buyers are happily back in buying mode.
The unexpected result in the Federal election sounded the bell for market stabilisation. Buyers feel the bottom has been reached and they aren’t at risk of prices going down further after they buy.
Equally, sellers can enter the market with greater confidence that there will be genuine interest, if not competition for their property.
Auction clearance rates in Sydney and Melbourne are a great barometer for market health. These declined to around 45% but have now recovered to 70% to 75%.
As we head towards Spring, we are seeing higher buyer interest but available listings remain low for now. As we see some of that volume return going forward, it appears likely that buyer levels are sufficiently deep to cover any reasonable increase in listings.
With a low-interest rate environment remaining indefinitely, I believe that many first home buyers and upgraders will be keen to transact across all city and regional markets.
The highest demand will be for the highest quality. Areas, suburbs, streets and properties that represent the better offerings of a neighbourhood will be in greatest demand this Spring.
Securing these types of homes will cost a bit more but longer-term growth suggests that a higher initial investment will be well and truly rewarded with stronger capital appreciation.
Most people own their property for around 10 years. If you compare the difference between a 5% capital growth rate each year and 8% over the life of a property, you’ll discover that the gap between different properties is likely to widen, not contract.
So, buy quality and focus on location and aspect this Spring.
In major cities, in particular, if you want to maximise your capital growth, look into some of the new infrastructure projects and identify areas that are beneficiaries of road and rail enhancements. Some areas have or will soon become 20-30 minutes closer to the CBD so that will spike values in the next sales cycle.
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