Welcome to our Summer report.
As we have often mentioned, Australia is made up of many different property markets which are influenced by both national and local factors. They therefore often perform differently at different times. National factors are usually the overarching sentiment around the Australian economy generally and local factors are more state or area based.
In 2024 the overarching national sentiment has really been one of caution based around cost of living pressures and interest rates. The caution is also underwritten by the fact that there has not been a clear direction for the way ahead. Most have been waiting for an indication that inflation is reducing and therefore, for the RBA to cut rates to create a clear direction forward. For potential property market participants who are trying to make large financial decisions, a clear (as possible) economic path forward is an extremely helpful platform and therefore they are more likely to act.
If we look at state and local based factors that directly apply to us, the Victorian government has provided little confidence that they are in control of the state economy, and this has added to the sense of caution in the coastal property markets. This has had an effect on prices at all price points throughout 2024.
Much of this period has seen the final stage unwinding from the Covid period where we saw prices significantly artificially inflated. Throughout 2024 we have spent a lot of time observing the data and educating our vendors on where prices are currently at. This can be psychologically challenging for some when they saw what their property was worth during the Covid period and what buyers are prepared to pay now. Often many are still receiving rates notices with Covid period rate valuations on them. The rates are out of touch with the market and the Surfcoast Shire has received so many objections that they recently replaced the valuation company that provides these values to the Shire with another company. We expect to see rateable values reducing in line with the market. This should have a flow on to reducing Land Tax also.
We feel that we are close or at the bottom of the cycle now as we have had a strong finish to the year in terms of numbers of sales. There are two factors at play here. The first is that many buyers with capability are sick of waiting and want to get on with their life plans. The second is that without an actual interest rate cut to confirm the direction of rates, most are happy to accept that rate rises are over. The most recent RBA meeting minutes recorded a change in their language to confirm this. Banks are also now offering discounted variable rates to new customers to gain market share, confirming their thoughts that rates are also unlikely to rise.
An actual interest rate cut will signal the bottom of most property markets from an overarching sentiment perspective and then it will be local factors that will dictate the rest. Land tax will remain an issue in the coastal markets especially in the upper price points. Increased building costs are another factor that will dictate what buyers will buy and how much they will pay.
Subject to unforeseen world events, we believe in 2025 there will be some pent-up demand expressed. Those waiting “for the right time” but with capability, will want to get on with their life plans. An interest rate cut will psychologically act as a starting gun giving them permission to think that “the right time” is getting closer. What this will do to prices is too hard to predict, however we believe engagement levels are likely to rise because of this pent up demand from those currently sitting on the sidelines.
We are already starting to see this occur however the property needs to be a compelling offering to attract a buyer at present. This is in terms of emotional appeal (they must really like the property) and in terms of price (it needs to make sense). The property needs to be this way for buyers to overlook the current economic background noise distractions and proceed with their purchase.
We hope you found this Great Ocean Report informative and if we can be of any assistance in any real estate matter please do not hesitate to call.