Welcome to our winter report. There is a lot going on in the world at present that can have an effect on the real estate markets so let’s see if we can break down what is happening.
I have been writing these reports for about 25 years and every time I have written one I could repeat the opening statement to this report – there is always a lot going on in the world that can affect our real estate markets.
There is very rarely “the right time” to transact in real estate and that will vary depending if you are a buyer or a seller and that time can only really be seen in hindsight. For example, who knew that Covid would facilitate a huge rise in capital values and who knew that we were about to have 13 interest rate rises following that period that would flatten the property market? No one. These highs and lows can only be seen in hindsight and it proves that all we can look at is the large movements in trends as a guide.
That leads us to where we sit right now and what is the probable outcome moving forward? It is our feeling that when we look back from the future it will be seen that we have just passed the bottom of the market for this cycle. The top of the market was in 2022 and with interest rate rises and increased Land Taxes, we have seen an unravelling of prices back to their historical statistical mean ever since.
Two recent interest rate cuts and more to come, inflation under control, unemployment low and the stability of no change in government all lead to an environment that potential property market participants feel more comfortable in to transact. Sellers want to see some signs in the market that a fair outcome can be achieved and buyers want to know that interest rates are reducing which in turn supports price stability. This is called market sentiment and is the single largest factor that governs the health of a property market. We are also herd animals, therefore we feel more comfortable doing what everyone else is doing. So initially, we are looking at the engagement levels in the market (the amount of people who are considering buying or selling) and we have already seen signs that this is occurring.
The most visible measure of the health of the property market is the auction clearance rates advertised each week. The Melbourne clearance rates are the most relevant to our coastal markets and they have been trending above 70% since Easter. A figure consistently in the low 70% range is a healthy balanced market. This is particularly so because when you consider that early in a new cycle there is often some pent up demand expressed in the market from sellers who want to get on with their lives and have been waiting for a more positive time to sell. Therefore listings often increase in the early part of the cycle and the test of the market is to whether there are enough buyers to soak these up. Sellers are often buyers as they trade to suit their lifestyle or investment needs. How this increased activity will affect prices is just too early to tell.
With the coastal markets we tend to see the positive sentiment flow on from the activity in Melbourne. This year we believe that this is likely to fit nicely with our seasonal market as we move into Spring. Interest rates are really the most relevant driver of confidence and we could possibly see two more cuts in the winter – spring period, which will obviously have a positive influence in the real estate markets.
We hope you found this update informative, if we can be of assistance in any real estate matter please do not hesitate to call on 5220 0000Welcome to our winter report. There is a lot going on in the world at present that can have an effect on the real estate markets so let’s see if we can break down what is happening.
I have been writing these reports for about 25 years and every time I have written one I could repeat the opening statement to this report – there is always a lot going on in the world that can affect our real estate markets.
There is very rarely “the right time” to transact in real estate and that will vary depending if you are a buyer or a seller and that time can only really be seen in hindsight. For example, who knew that Covid would facilitate a huge rise in capital values and who knew that we were about to have 13 interest rate rises following that period that would flatten the property market? No one. These highs and lows can only be seen in hindsight and it proves that all we can look at is the large movements in trends as a guide.
That leads us to where we sit right now and what is the probable outcome moving forward? It is our feeling that when we look back from the future it will be seen that we have just passed the bottom of the market for this cycle. The top of the market was in 2022 and with interest rate rises and increased Land Taxes, we have seen an unravelling of prices back to their historical statistical mean ever since.
Two recent interest rate cuts and more to come, inflation under control, unemployment low and the stability of no change in government all lead to an environment that potential property market participants feel more comfortable in to transact. Sellers want to see some signs in the market that a fair outcome can be achieved and buyers want to know that interest rates are reducing which in turn supports price stability. This is called market sentiment and is the single largest factor that governs the health of a property market. We are also herd animals, therefore we feel more comfortable doing what everyone else is doing. So initially, we are looking at the engagement levels in the market (the amount of people who are considering buying or selling) and we have already seen signs that this is occurring.
The most visible measure of the health of the property market is the auction clearance rates advertised each week. The Melbourne clearance rates are the most relevant to our coastal markets and they have been trending above 70% since Easter. A figure consistently in the low 70% range is a healthy balanced market. This is particularly so because when you consider that early in a new cycle there is often some pent up demand expressed in the market from sellers who want to get on with their lives and have been waiting for a more positive time to sell. Therefore listings often increase in the early part of the cycle and the test of the market is to whether there are enough buyers to soak these up. Sellers are often buyers as they trade to suit their lifestyle or investment needs. How this increased activity will affect prices is just too early to tell.
With the coastal markets we tend to see the positive sentiment flow on from the activity in Melbourne. This year we believe that this is likely to fit nicely with our seasonal market as we move into Spring. Interest rates are really the most relevant driver of confidence and we could possibly see two more cuts in the winter – spring period, which will obviously have a positive influence in the real estate markets.
We hope you found this update informative, if we can be of assistance in any real estate matter please do not hesitate to call on 5220 0000