Issue 40 | Thursday 11 July 2024 | Navigating Mid-Year Market Shifts: Insights and Strategies for Buyers and Sellers

Hi, Andrew Bell here. It’s great to be with you as we reach the midpoint of the year, with a clear view of the past and an increasingly defined outlook for the immediate future.

If you speak to any open and honest agent, they’ll tell you the market has changed. The bullishness of the past three or four years has evaporated. Yet, the need for people to have a roof over their heads persists. We are observing significant diversity in markets across the country. Markets like Brisbane and Perth continue to show enormous strength, while Melbourne and Hobart are experiencing weaker conditions, with many other metropolitan markets also softening. At the top end of the real estate market, with prices above $10 million, strength remains nationwide. However, at the medium price level, buyers are increasingly affected by the toll of higher interest rates over the past 12 months and the fear of further increases.

Various research houses report differing figures, but not by much. Some show medium house prices rising by 7.6%, others by 7.7%, and some by 8%. I find using medium prices problematic because they don’t provide a clear picture. Medium prices can be skewed by strong activity in higher price brackets without reflecting what’s happening in lower price brackets, and vice versa. Consequently, we can no longer talk about the Australian property market as a whole due to its enormous diversity.

What we expected and are now starting to see is an increase in the number of properties listed for sale. In some Adelaide suburbs, listing numbers have doubled compared to a year ago. Listings are also piling up in Melbourne’s outer suburbs. In Sydney’s inner suburbs, such as Tallawong in the northeast, listings have more than tripled. Meanwhile, closer to home in Southport, listings have declined by 68%, with Surfers Paradise down 45% and Broadbeach down 28.6%. A lack of listings has been a major driver of price growth over the past four years, matched by rising demand through population growth. While it might be fair to expect the increase in listings to reflect price declines, Pexa’s analysis suggests that while listings are growing, so is demand.

Pexa research indicates that the property market is gaining momentum despite high inflation and interest rate pressures. However, others disagree, suggesting that for the bulk of the market, interest rates are taking their toll. These rates have remained significantly higher for 12 months, exacerbated by rising living costs. Reports indicate that 40% of bank customers who receive hardship assistance through reduced or deferred loan payments fall into arrears immediately after the assistance period ends. Another report shows that 40% of Australians are living paycheck to paycheck, teetering on the edge.

There is also the possibility of further interest rate rises. The minutes of the last Reserve Bank meeting indicated a discussion about the possibility, although they have delayed an increase pending more data. A panel of Australia’s leading economists agrees that there are likely to be two more interest rate rises before reaching the peak, with rates expected to remain high for another 12 months before any reductions.

The real estate market has experienced four years of continuous price rises, but it’s safe to say that nothing can rise forever. There are signs that while the fundamentals of the market—supply and demand—remain favorable, the brakes are on, and the best may be behind us. For those considering selling, it would be wise to bring forward your plans to take advantage of the current market conditions. For buyers, there is encouragement in the prospect that while interest rates are high now, they should peak in a year or so and then start to fall. While loan repayments are uncomfortable now, between tax reductions, other government cost-of-living benefits, and the prospect of lower interest rates, you will be in a better position. Owning your home remains preferable, as many tenants are frustrated by notices that the owner is selling, turning their world upside down.

Many of our senior Australians are shocked by the sense of insecurity in today’s world, but we all need to get used to the constant change and pressures. The key is to find resilience, face challenges, and deal with them as best you can. A good, clear strategy is essential.

I look forward to being back with you in a fortnight. In the meantime, remember that we are at the top of the slide toward the end of the year, and advancing our yearly ambitions is always a good idea. Set targets to achieve before year’s end.

Warm Regards,

Andrew Bell, OAM
Chairman
The Ray White Surfers Paradise Group

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