Property Market Update - May 2022
Buyers are dwindling but market is ripe for picking
We're coming out of a hot property market right now, so the interest in housing is starting to dwindle. While this isn't great news for those who are selling, this is excellent for the savvy buyer who is looking to avoid a huge crowd or intense bidding wars.
You’ll notice a lot of real estate agents aren’t disclosing the sale prices on their sold listings, citing ‘contact agent’ for the sale price. This is because they have sold for under their expectation and they don’t want to promote the fact that the price was lower than the original expectation.
If you’re like us who had inspected properties a few months ago, you’ll notice an increase in phone calls and text messages from real estate agents asking if we’re still looking to buy. Real estate agents only make calls when they need buyers. Even more reason for savvy buyers to haggle a bit harder on pricing.
Quality properties hitting the market now
Sellers who have bought elsewhere have waited until after the Easter and ANZAC long weekends are out of the way, and have now listed their properties. We’re seeing a significant uplift in quality properties hitting the market.
Property value is always about timing. There are also many sellers who thought the uplift in pricing in 2021 would continue, hence many people decided to sell. We are now seeing those properties hit the market. In some cases, where the seller doesn’t have to sell, they have removed the property from the market. The remaining properties on the market are more likely to be sellers who have committed elsewhere and now have to sell.
And with buyer demand dropping off, particularly from those who are yet to secure their finance, now is a great time to negotiate a lower sale price.
Regional property values still rising
Latest data from CoreLogic shows that whilst the rate of growth is slowing, properties across Australia’s 25 largest non-capital city regions are still growing at a rate of 4.7% in the three months to April.
CoreLogic’s Research Director Tim Lawless commented “Although demographic data is significantly lagged, anecdotally we are still seeing strong demand for regional housing supported by high internal migration rates.”
“The high level of demand is supported by estimates of home sales, which were tracking 20.1% above the previous five-year average over the three months ending April 2022.
“It seems many employers across the relevant industries have implemented permanent hybrid working arrangements for staff which is likely to be supporting the stronger demand trend across regional Australia.”
Whilst we have seen an increase in quality properties hitting the market, stock levels are still low. Tim Lawless reported in the Regional Market Update, “We are continuing to see advertised stock levels remain extraordinarily low across regional Australia and settled sales activity looks to be holding firmer relative to the capitals. A lot will depend on regional migration patterns and we expect the demographic trends to continue favouring regional housing markets, especially those regions with some lifestyle appeal within a few hours’ drive of the major capitals.”
Government initiatives to stabilise property market and drive demand
35,000 First Home Loan Deposit Scheme places to be released from 1 July 2022
10,000 Regional Home Guarantee places to be released from 1 October 2022 to 30 June 2025
5,000 Family Home Guarantee places to be released from 1 July 2022 to 30 June 2025
10,000 Help to Buy Scheme places to be released from July 2022
The real estate market is multi-speed, which means that demand in some locations and price brackets will be higher than other price brackets. We expect that the first home buyer market, which is essentially any existing properties up to $800,000 and any new homes up to $950,000 to increase in demand from 1 July 2022 as new government scheme places are released. At the moment (as at May 2022), all the places on the existing scheme have been filled, hence a drop off in demand for this price bracket.
Pre-approved buyers have superpowers
For those who have a home loan pre-approval in place, choosing to buy now might be the best decision you make. Reason being, as interest rates increase the borrowing capacity assessment will change to calculate your ability to make repayments based on the increased interest rate. This means if you need to re-apply for your pre-approval because the previous one has expired, you may not secure the same loan amount.
Secure a pre-approval before lender assessment rates change
With interest rates and inflation rising, the metrics the lenders use to calculate your borrowing capacity have already changed and will continue to change as interest rates increase. This will, in many cases, reduce the borrowing capacity for some borrowers, particularly those who are looking to secure a fixed interest rate. This is because the bank’s assessment rate is based on the actual interest rate plus an assessment buffer. As fixed interest rates are now much higher than the variable interest rate, the added buffer of 2.5% will make the final assessment rate more difficult to service, and the loan approval amount will be reduced. While interest rates and the assessment buffer are still low, now is the time to start your pre-approval application process.