MY New FY Predictions
We have experienced some of the most tumultuous and rapidly shifting markets across the country throughout the past two years. The pandemic brought with it exponential growth in terms of buyer demand and property prices, turning the industry on its head. Yet fast forward to the new financial year and the record prices, the rapid sales and the influx of activity across all aspects of the market have certainly started to level out and we now look forward in anticipation as to what we can expect from the next 12 months.
This month we saw the RBA hold interest rates at 4.1% after we reached the highest cash rate since April 2012 through 12 increases in this tightening cycle. The decision to continue to raise interest rates has been driven by persistently high inflation and tight labour markets yet what impact has this had on the housing market?
The consecutive interest rate rises saw a quick rebalancing of the housing market, which prior to interest rate rises were peaking at all time highs due to the surge in demand for housing during the pandemic. Keeping in mind though, house prices are not just driven by interest rates and inflation levels, in fact consumer confidence and supply and demand can be stronger influencers in regard to property values. Moving forward it is suggested that we can expect an extra half a million people moving to Australia in the next two years, between both skilled workers and international students. This population boom will increase competition within the rental market, driving rents higher and eventually pushing property sale prices upwards. As supply increases, the demand levels will struggle to keep up, particularly since building approvals are at a decade low.
The construction industry is still pushing through the pain associated with rising material and labour costs and a shortage of labour supply. This is evident with the ongoing collapse of small and medium sized building companies across the nation, particularly in metro areas. The lack of development ready land, the excessive building costs and the continued demand mean new housing prices escalate, pushing demand back towards established properties.
Experts still suggest that across the nation, average property prices will soften momentarily but rise again by approximately 2% by the end of 2023. The current market is certainly demonstrating that auction clearance rates are largely steady in comparison to historical data, with vendors meeting the pricing expectations of the market given the current climate. As we head towards spring though, we can expect a shift towards more confident consumers, higher levels of demand and economists are not ruling out property prices rising by up to 10% across 2024 and into 2025.
For us as property experts and real estate agents it should give us a push towards auction as a preferred method of sale for a range of reasons. Obviously, there is the deadline for buyers and an environment of competition but probably more important is the uncertainty around pricing a property. The risk with private treaty is to undersell the property in a shifting market, whereas auction removes the question marks and allows the current market demand to determine the absolute best price for any property. As agents we should step back from controlling the uncontrollable and instead ensure sellers are presenting their property in the best light and allowing active buyers to compete against one another in the auction arena to secure the property.
If you are starting to see the value in the auction process but are yet to dip your toes in the water or you’d simply like to brush up on your auction skills then we are here to help. With a range of training options we can cater to the rookie auction agent through to the experience auction agent wanting to sharpen their approach. Reach out to us today and we can work with you to customise an auction training solution that will put you at the forefront in your market as conditions ebb and flow over the coming months.
