Where is the market at?

The most common question we are getting asked is, “Where is the market at right now?” And our overview may surprise some.

We’re in a very strange market at present. Headlines are suggesting that the market has bottomed, while many purchasers who are active in the market are reporting that competition is tough.

The competitive buying conditions are more than just palpable.

Data is also supporting this swing. Auction clearance rates in our capital city certainly aren’t at their lofty 2021 peak, but they are by no means signalling a miserable buyer’s market either.

People keep asking, “But what about the interest rates? And what about the fixed rate cliff the media keeps talking about?” The reality is that not every buyer is constrained by borrowing capacity. We have older buyers with strong cash or equity positions, foreign buyers purchasing for their student children, and buyers who are biding their time and waiting for ‘the perfect time’ to buy.

This past fortnight has felt different at the coal face for us.

Prospective buyer enquiry is significantly stronger, buyer motivation has switched gears, and some surprisingly strong sales results have caught our eye.

What has caused this?

There are two forces at play. Firstly, Undersupply is limiting buyer choice and the motivated buyers (ie. those who are determined to buy shelter now) are pushing hard.

Typically we would be enjoying the years’s second biggest wave of new listings at this point, but 2023 is different. Vendors are holding out for a better time to sell, and meanwhile we have heightened demand as new arrivals numbers are peaking.

The second force is Sentiment. Initially it started with a couple of articles in the press suggesting our property market has bottomed out. A glimmer of hope has more recently been ignited in relation to our interest rate moves following the minutes of the latest RBA meeting last week.

Tim Boyle of Finalytics Financial shared an interesting newsletter addressing this very driver. As this chart below shows, our monthly CPI indicator, (a reasonably blunt tool that gauges inflation) showed a decrease for the month of February. While it is just one data point, it hints at the potential for rate increases to ease (or cease).

In tandem with other statistics, there is reason for consumers to hold out hope that interest rate movement may stabilise soon. Tim’s explanation of the chart below was apt also. Our accumulated savings through COVID, (and for many of us, through lockdowns) buffered our initial response to interest rate hikes. For plenty of households, the COVID savings kept YOLO, (you only live once) spending alive and well despite heftier mortgage and debt repayments.

Now that household savings balances are dwindling, so too are YOLO purchases.

The February Westpac Consumer Sentiment table below clearly shows a switch in buyer behaviour when it comes to buying “major household items”, (something I’ve always termed ‘toys’). The initial signs of consumers pulling back their spending includes this measure.

“February’s drop came on the back of worsened expectations over the economy in the next 12 months and five years as well as of deteriorated households’ willingness to buy major household items. Moreover, expectations of family finances in the next 12 months and assessments of family finances compared to one year ago weakened.” (Source: Focus Economics)

And taking into account what our Reserve Bank Governor shared in the minutes, we anticipate buyer optimism to continue to build.

All we need now is for vendors to feel optimistic. In the meantime, we anticipate some strong price results for quality properties, (particularly dwellings that do not require immediate work) over the coming months.

Contrary to what many may believe, now is actually a good time in my view for a vendor to list a quality property.