STATE OF PLAY



The state of the real estate market is, in part, a self-fulfilling prophecy. When the media tells us all about the doom and gloom we are facing, the market seems to play out that way. Bad news begets bad news. However with property clearance rates on the rise again, the media is spreading the word and the more likely it is that the real estate market will continue to pick up. Who doesn’t love a good news story?


From all accounts properties are starting to sell well at auction, and if you’re thinking of selling this spring, the stars look set to align for a top result. Yes it’s true that traditionally spring is the best time of year to sell, but add to that a series of economic, cultural and psychological shifts, and this season looks set for a bigger uplift than most. Vendors made a windfall at competitive auctions recently when Melbourne’s sales success shot to new heights. In fact clearance rates hit almost 80 per cent at one point which was a two year high.



Investors are now back in the game too it seems, driving up demand, and prices. The Reserve Bank of Australia opted to keep interest rates on hold at 1% during their last meeting, but further cuts are on the horizon. The Australian economy is still showing signs of weakness however inflation increased marginally. The main threat to the Australian economy continues to come from uncertainty in global markets and the trade war between the US and China.


“While the federal government is able to give Australians tax cuts and the RBA can reduce interest rates, control over economic instability at a global level is much more difficult,” says realestate.com chief economist Nerida Conisbee.


“It is surprising to some at how quickly property market conditions have turned around. Prices are slowly starting to increase and we are looking at vastly different demand conditions from spring 2018. Buyers are back and are experiencing ideal buying conditions. They have more cash to spend and are finding it cheaper and easier to get finance.”



The challenge now is supply versus demand. With listings remaining low, sellers are in a market of opportunity and should can advantage of the lack of competition. This supply and demand imbalance will result in price growth and a much more positive spring than last year. After 12 months of uncertainty, vendors are increasingly confident they will sell their home.


Explains Nerida, “There has been a 25% increase in searches on realestate.com.au over the past 12 months. The biggest jumps occurred following three major events. The first was the result of the federal election – the Coalition win provided greater certainty around tax incentives and led to improved market confidence. The second and third biggest increases in search activity followed the two most recent interest rate cuts. When there are buyers in the market, we start to see positive signs flow through to other indicators. Clearance rates in Melbourne and Sydney are particularly high and we are seeing early signs of price growth in premium suburbs across the country.”



Importantly, access to finance is getting easier. The Australian Prudential Regulatory Authority (APRA) implemented restrictions around home loan lending in 2015 which made it difficult to get a loan, particularly for investors. Once the Royal Commission was announced in December 2017 and the focus on responsible lending ramped up, it became even tougher to secure a loan. So far this year, APRA has removed three restrictions to lending, and whilst the banks are still cautious about lending and it’s likely the focus on responsible lending will continue, all indicators point to access to finance easing. Responsible lending is a positive - rather than applying a low standard of living expenses to all applicants, lenders are now looking very closely at an individual’s real spending habits.



After two interest rate cuts, getting a home loan is now much cheaper than it was last year. This means people can borrow more, or alternatively, it makes their repayments lower. In the next 12 months, it is looking highly likely we will see another two rate cuts. Provided unemployment doesn’t rise rapidly, this low interest rate environment will continue to be positive for buyers.


Another key factor is that the recent income tax cuts will give people more to spend. Tax cuts came into effect at the start of this financial year, and although modest, they do put money into the pockets of most Australians.



The upshot of it all is that the current state of play is now both a buyer’s and seller’s market. For buyers the conditions are ideal (low interest rates, tax cuts and access to finance slowly easing) but there is very little to buy. For sellers, a lack of selling competition is making properties easy to sell and some strong prices are being achieved.


Win win?


If you are interested in buying or selling, and need some sound advice on the market, have a chat with Sam Danckert, 0432 444 040.


www.danckert.com.au

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