Amidst the turmoil, buyers in some markets are stirring again
After months of interest rate rises, tax uncertainty and subdued buyer confidence, early signs suggest Australia's property market may be finding its footing as buyers re-energise.
Recent months have been an emotional period for buyers and sellers alike but things may not be quite as they seem.
A great deal happened during the first half of the year. Inflation rose sharply, prompting three interest rate increases as the Reserve Bank sought to bring it back under control. We then saw the Federal Government announce significant changes to negative gearing and capital gains tax, adding another layer of uncertainty for property investors.
Nor is there any shortage of variables unfolding now to keep property vendors and buyers on the rit toes.
It was hardly surprising that the initial reaction from consumers was an emotional one. There was frustration, some anger, and considerable uncertainty about what to do next. As has occurred so many times before, many buyers and sellers simply sat on their hands while they tried to make sense of the changing landscape.
Consumer confidence fell, and with it, activity across the property market.
Most people would also have read reports of declining property inspections, lower auction clearance rates and, in parts of Australia, falling property prices.
What often gets lost in those headlines, however, is the context.
History consistently shows that June and July are traditionally quieter months for real estate.
A percentage of buyers and sellers choose to delay transactions until the new financial year, while the cooler winter months naturally see fewer people actively inspecting property. Traditionally, activity accelerates again as spring approaches. Sellers want to position themselves to move before Christmas, while buyers are equally motivated to secure a home before the end of the year.
Buyer activity rekindling
Interestingly, the latest statistics from the Ray White Group, together with emerging data from other sources, indicate that from around the middle of July there has been a noticeable increase in buyer activity. More people are searching online and, importantly, they’re beginning to return to open homes in greater numbers.
It is still too early to know whether this trend will continue, but conversations with buyers suggest there is a growing perception that now represents a better buying opportunity than at any time over the past few years. In many respects, that perception is justified. If buyer activity continues to strengthen through spring, however, those opportunities may become increasingly limited.
Our recent auction results provide an interesting insight into what’s really happening. Current auction success rates are sitting around the 50 to 55 per cent mark. That isn’t because buyers have disappeared. In fact, we’re still averaging approximately 3.1 registered bidders per auction. The challenge is simply that there remains a gap between what sellers hope to achieve and what buyers are presently prepared to pay.
Importantly, the auction itself is rarely the end of the negotiation. In the days immediately following the auction, negotiations continue, and within a week our overall success rate generally rises into the 70 per cent range. Based on experience, I would expect that within 30 days the ultimate success rate will exceed 80 per cent.
There are also two fundamental factors that receive far less attention than they deserve.
Rents and population growth
The first is Australia’s continuing population growth, coupled with our inability to build enough homes to accommodate the additional people. Every month we continue to fall further behind in delivering the housing required for our expanding population.
That creates an ever-increasing shortage of homes. Even for people who may prefer to wait before buying, the reality remains that everyone still needs a roof over their head. If they don’t purchase, they must rent.
The rental market tells the same story. Sydney currently has around 161,000 active rental listings, which is the lowest level since 2017. Yet Sydney today has approximately 520,000 more residents than it did back then.
The obvious question becomes: where are those additional half a million people living? It explains why rents have risen so dramatically, but it also explains why buyer demand has not disappeared.
The second factor often overlooked is that Australia is no longer moving as one national property market.
While Sydney and Melbourne continue to face significant headwinds, largely driven by issues specific to those states and their political settings, markets such as Queensland and Western Australia continue to outperform. It is another reminder that where you invest is as important as when you invest.
After more than 50 years in real estate, one lesson remains constant. We’ve experienced changing markets before. Every correction is initially met with uncertainty and hesitation. Buyers pause. Sellers hesitate. Confidence weakens. Eventually, however, the fundamentals reassert themselves.
People still need somewhere to live. Population growth continues. Housing shortages remain. And over time, consumers adjust to the new environment and return to the market. Despite the current uncertainty, I continue to believe that for most Australians, there remains no better long-term investment than well-selected real estate.
