This winter has been unusually busy for real estate in Australia. However, selling conditions have begun to temper. The Domain Buyer Demand Indicator shows demand has slowed from the peak in October 2021 by 32.6% for houses and 27.7% for units nationally. This trend is likely to create favourable conditions for buyers this Spring.
In most capital cities, except for Brisbane and Adelaide, there was an increase in supply this July compared to the same period last year. With more stock available, conditions are less competitive for buyers, likely resulting in downward pressure on prices. In addition, sharp interest rate increases by the RBA, and further hikes predicted in the coming months, will reduce borrowing capacity for many buyers putting additional pressure on prices.
However, it is not all doom and gloom for sellers. Fundamental demand drivers remain strong, with low unemployment, wage growth expected to pick up this year, and international migration returning. As a result, properties that are marketed at a realistic price point will still sell quickly.
The ideal time to buy?
With more choice available and properties staying on the market longer, buyers will enjoy much calmer conditions this Spring. Throughout most of 2021, buyers faced intense competition as demand furiously outstripped supply.
However, this year we have seen a change in this trend. There are more properties coming onto the market, and they are taking longer to sell, reducing competition among buyers and giving them some much-needed breathing space.
PropTrack data shows the median number of days a property was listed on realestate.com.au in July was 43 days, up from 39 days in June. This is expected to be a lasting trend and will bring a healthier balance to the market.
This Spring, buyers will welcome these favourable conditions. They will have the time to make well-informed purchasing decisions under less pressure than we have seen over the last two years.
Realistic pricing is the key to seller’s success.
Market conditions for sellers are varied across the country. We’ve seen a downtick in buyer demand in Sydney, while in Adelaide, demand for houses was up 18.3% in July 2022.
Interest rate rises lead to increased mortgage repayments for those with established home loans, but it also reduces the borrowing capacity for buyers leading to downward pressure on prices. We have already seen evidence of this in Sydney, with the highest level of house price discounting in three years reported last in July 2022. During the three months to July, houses in Sydney sold for an average of 6.7% less than their original advertised price.
Market conditions vary from state to state, but this trend is expected to be replicated across the capitals in the coming months to varying degrees.
The secret to successful selling this Spring will be realistic pricing. Research indicates that properties that are priced to meet buyer expectations are still achieving quick sales. Buyers are in less of a FOMO frenzy now and are less accepting of over-inflated price expectations.
Thinking of building? Think again.
The Australian construction industry has been plagued with supply issues since COVID began. We are now seeing many construction and building companies unable to fulfil fixed-price contracts due to the rising cost of materials. This leaves many customers with unfinished houses and no idea when they will be able to move into their homes.
For now, it is probably a good idea to put any building plans on the back burner. Likewise, if you’re considering adding an extension or serious renovations to a property, you will likely face serious challenges until the industry can overcome ongoing supply issues.