It’s fair to say that the Australian real estate industry hasn’t played nice over the last 12 months.
Now that Spring is upon us, Australians have been left feeling confused about how this traditionally busy Spring selling season will play out. Understandably, you might be wondering whether you should get ready to sell your property now or hold off to see how the rest of the market reacts before making your move. We’re here to shed some light on past and current market conditions, which may provide some clarity to help you make your decision.
What happened to the Australian real estate industry and why have market conditions been tough?
The light has been shining bright for Australian real estate in recent months, as auction clearance rates in Victoria, New South Wales and South Australia have reached their highest clearance levels since 2016. For many this sounds like where it should be, however the fact is key capital city real estate markets saw property price declines at historic levels. More specifically, Melbourne, Sydney and Perth saw property prices fall by 8.2%, 9.0% and 8.7% respectively in the 2019 financial year, which triggered a decline in the number of properties going to market. (Kehoe, 2019)
Many factors have been at play that have contributed to the change in property values and tougher market conditions over the past two years. These include:
- Regulatory crackdown on the banking sector and scrutiny of lending standards from the financial services royal commission.
- A negative perception of investment across the market, highly influenced by exaggeration and fear mongering from the media.
- The increasing gap between household wage growth and property price growth.
- Lower confidence in the market due to geopolitical market forces.
- The uncertainty of the Federal election in May 2019 and proposed changes to negative gearing benefits for residential investors.
What has changed this year that may influence my decision on when to sell?
The market has seen an overwhelming sense of relief post-election. The certainty of a government with no plans to change negative gearing, coupled with competitive domestic interest loan rates and the easing of credit assessment criteria for new loans have helped regenerate confidence in the market. Industry experts are predicting big increases in inquiries and higher groups through Open for Inspections, with auction clearance rates in Sydney and Melbourne bouncing back to 80 per cent during August 2019, some of the strongest results in two years. (Letts, 2019)
While some banks are reporting housing prices in key markets in Victoria and New South Wales have stopped declining, other markets in South Australia, Queensland and Western Australia still face uncertain price adjustments. However, Westpac reported that, overall, consumer attitudes towards spending has risen, with the “time to buy a major household item” index at its highest level since late last year. (Cranston, 2019)
It is still too early to interpret the full extent of the ‘downturn’ in real estate prices and whether we have truly hit the trough on pricing. While a full recovery is unlikely to happen for some time, Spring is at our fingertips and has historically produced a higher volume of listings nationally, so the upcoming December 2019 quarter should provide some interesting insight into the state of our real estate economy.
When making your decision on whether to sell, you should assess your personal constraints for selling your home above all else. Have you bought a new house and need to sell within a certain time frame? Have you recently experienced a major life event that requires you to sell your home? Ultimately, there are pros and cons of selling in every season and there are always potential buyers on the market.
- Cranston, M. (2019, July 10). Consumer confidence tanks despite RBA, tax cuts. Retrieved from https://www.afr.com/policy/economy/consumer-confidence-tanks-despite-rba-tax-cuts-20190710-p525r0
- Kehoe, J. (2019, July 9). The worst of the property downturn is over. Retrieved from https://www.afr.com/policy/economy/the-worst-of-the-property-downturn-is-over-20190710-p525q8
- Letts, S. (2019, August 29). Auction clearance rates point to rising house prices, but is it sustainable? Retrieved from https://www.abc.net.au/news/2019-08-25/rising-auction-clearance-rates-point-to-higher-prices/11442334