Curious about what’s going on with the Aussie property market right now and whether it’s still a good time to buy?
Our National Head of Acquisitions, Brad Purcell, has put together an analysis of the current state of the national market.
The market right now
Nationally, we've noted a return to a more traditional, cyclical market since the peak of the owner occupier-lead recovery from the end of 2019 but more notably throughout the pandemic and into the start of 2022.
In saying this, there has been a notable shift in buyer behaviour and general market confidence since the end of January 2023. As of today, every capital city has demonstrated positive growth in median values for the first time in about a year.
This is also represented by widespread increases in auction clearance rates and more consistent, emotional price premiums being paid for assets, particularly in Sydney and Adelaide.
It could be safe to assume that the bottom of the market is behind us. Our assessment suggests the bottom of the market in most locations was between October 2022 and February 2023.
What the capitals are doing
With a return to that more traditional, cyclical real estate market from a national landscape, it's probably important to highlight that Sydney, historically, leads the trend in terms of timing and activity.
Interestingly, Sydney was the first market to demonstrate price correction pre-interest rate rises in March 2022 and has also been the first capital city to post price corrections after declining values started (outside of random data events for Perth).
CoreLogic's monthly Hedonic Home Value Index showed Sydney's median values increased by 0.3% in February of this year. In March, values increased again by 1.4%, but Sydney was then joined by Brisbane and Melbourne.
April witnessed Sydney's values increasing again by a further 1.3% but now, every capital city is in positive growth territory.
Regional activity
The level of competition has definitely simmered in regional markets, with a notable drift in days on market. But, a lot of regional markets remain relatively buoyant.
With investors entering the market with more vigour and diluting the homeowner buying pool, though, it is a reasonable assessment to suggest that cities will likely outstrip regions in terms of demand. Good properties are still selling well though.
The best markets for investors
There are certain locations in Adelaide that are demonstrating this rare but “Goldielocks” situation of offering very strong capital growth forecast with robust immediate rental yields based on the current levels of demand and key location fundamentals.
The improvement in the perception of value in Brisbane and Canberra is also an interesting consideration for us. There are some examples where assets are being secured for significantly below their previous value from 12 months ago.
This provides sound evidence of the market's appetite for property in that area and possibly demonstrates access to swift capital growth when the social proof of the market recovery filters through to the general public.
Looking forward
Generally, our outlook reflects a return to a more standard, sustainable level of capital growth over the next 12-24 months. There are obviously some external market factors that can impact this, but in our opinion, these are more globally oriented factors, not local ones – like this highly popular "fixed interest rate cliff".
Now, the general population has more certainty around where interest rates will land, unemployment is still very low and we are increasing our skilled migration. When coupled with continued low levels of available listings, it places upward pressure on pricing, as the supply/demand skew transitions back to demand outweighing supply in most locations
We're certainly not expecting the type of growth we witnessed during 2020 to early 2022, but from our perspective, the risk of continued or more substantial price correction is also highly unlikely based on what we're witnessing on the ground.
So, should you buy?
It is unlikely that purchasing conditions are going to improve. The opposite is more likely due to the level of competition in the buying arena increasing, while stock levels remain well below the five-year average and demand continues to grow.
It's also important to note here that any property purchase should be part of a long-term strategy and timing is a minor consideration from a Milk Chocolate perspective. For houses in Australia, asset selection, location and other key real estate fundamentals trump the timing of your purchase based on the performance of capital growth in the long term.
If you’re looking to purchase an investment property, expand your existing portfolio or find a family home, get in touch to discover how Brad and the Milk Chocolate team can help.
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