Property markets are in turmoil as the effects of rapid-fire changes filter through to all of us - the people at the coalface.
Rising interest rates and changes to property taxes were both designed to disrupt the market. They have succeeded. This affects everyone who lives in a house or apartment (owned or rented) in Australia.
The biggest issue is uncertainty. What will happen next.
Media analysis and reports are primarily from a political viewpoint, often from self-interested political zealots, and unreliable in fact. Social media posts are worse. Consumer confidence is shattered due to the unexpected and dramatic changes, so the property market wobbles with uncertainty, waiting for direction.
From those in the industry: On current fundamentals the most likely scenario for house prices is a short correction followed by a solid bounce back (the word short being suitably ambiguous!).
Fact: There is an underlying supply and demand problem. At the time of writing the rental vacancy rate in Australia is 1.6%. In a balanced market that would be closer to 3%. This is representative in numbers of more people trying to enter the housing market than there are homes coming onto the market.
As a fact that has been the case for many years, and that trend is going to continue.
The recent changes in interest rates and property taxes will not fix it. We can hope that the Government
incentives specifically targeting build of more homes work, but the reality is Governments have been announcing build of more homes for years, with promises not kept. Current policies are a further dis-incentive. How do you think that will work out?
For those in the position to do so, this price drop could be seen as a buying opportunity. Consumer confidence levels are low, buyers are scarce at auctions, higher costs are unfortunately leading to some forced sales.
Everyone’s personal situation will be different, but from a macro view: This is the worst time to downsize. A 5-10% drop in value on your higher value sale property is more in dollars lost than the equivalent percentage decrease (dollars gained) on the lower value purchase property. Conversely – it is a great time to upsize! For those wanting to move to a bigger/better home (including first home), this market downturn can be used to your advantage.
What is worrying is the low vacancy rate. We need more landlords providing rental accommodation; providing homes for those who cannot or choose not to buy. Unfortunately, with higher costs, higher rents are required to encourage landlords into the market. The low vacancy rate is driving such increases in rents; the demand/supply economic equation is in action. Effectively, the Government is forcing increases in rents, hurting the very people it says it is helping.
For prospective property investors: The current downturn provides opportunities to buy. Economic analysis of the current Australian housing market shows demand for housing continuing to outstrip supply and building costs continuing to increase. In that universe, property prices will not be crashing down too far and will continue up over time.