Considering a property purchase but feeling a little hesitant due to everything that’s been going on in the market recently? From interest rate hikes to a global fight against inflation, that kind of uncertainty is completely justified.
However, according to our economics, data and purchasing teams, it’s potentially an even better time to buy.
Naturally, we keep a very close eye on the market, and we do so through both an on-the-ground and data-driven analytical lens. Combined, these two views have shown that while the market has certainly shifted, there are plenty of solid reasons to continue buying.
More opportunities to buy
What we’re mostly seeing is ‘interest rate shock’, whereby the speed and intensity of the last three interest rate rises have brought the majority of the mid-end owner-occupier market into a holding pattern. Effectively, this buyer demographic is in a state of ‘wait and see’.
The result is a significant downturn in buyer activity across nearly all Australian markets. As a consequence, we’re observing extended days on market, less competition and, ultimately, properties selling at their ‘correct’ value. Instead of the highly emotion-driven premiums that have been paid over the past couple of years, properties are now selling within our logical value assessment ranges.
Underlying demand is also still strong, particularly from investors, with rental yields now catching up from capital growth spikes.
Long-term, not short-term, thinking
The ‘market correction’ state we’re in at the moment is familiar to us, as we’ve experienced it over the past few decades. It’s largely driven by short-term factors such as interest rate changes or business cycles.
In fact, our extensive data and analytics show that the market correction state is usually and quickly followed by a rapid recovery, which is driven by long-term factors such as population growth and the accumulation of wealth.
Property investment is a long game, which is reflected by the average holding period of 8-9 years for a typical property. Therefore, perennial factors tend to be more relevant when it comes to making property-related decisions. These include:
Despite a developed economy, Australia's population growth is three times higher than the OECD average. Australia's long-term population growth is 1.7 per cent per year, while the OECD average is 0.5 per cent; the USA is 0.7 per cent; and New Zealand is 0.7 per cent. High population growth has been the major driving force behind consistent property price increases in the long term
Australia is a small and open economy, strategically located in the Asia-Pacific region with a mega market of billions of people. There is a strong and growing appetite for the Australian lifestyle from middle-class people in the region. This is one of the drivers of consistently growing property values in Australia over the last decades and into the future.
So, what does this mean for you?
If our experience over the last 4-6 weeks is anything to go by, this could result in securing outstanding properties in stellar locations that were previously out of reach. Plus, we see this buying window continuing over the next few months leading into – and potentially including – early spring, so there’s still ample time to buy. Cooler climate markets will also soon transition into their traditional peak selling seasons.
And moving forward, the underlying fundamentals of the property market we mentioned above will remain strong, with evidence suggesting that any correction in the market will effectively be a soft landing. Once the market comes to accept the ‘new normal’ in terms of serviceability and interest rates, the possibility of a relatively quick and healthy recovery is definitely plausible.
If you would like to speak with one of our research, planning, data, or analytics team members about the Australian market click here to book a complimentary session.
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