After almost two years of depressed residential property market conditions we are now beginning to see a long awaited turnaround.
History tells us that property downturns rarely last longer than two years… and this one looks to be have followed the trend. In the past two months, buyer enquiry has lifted, auction clearance rates have risen from circa 53% to 73% (that’s significant!) and selling prices are on a slow but gradual rise.
And so what has caused the change?
Perhaps the most significant factor has been a recent relaxation of bank lending practices. In the 12 months prior to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the banking sector began tightening the criteria for loan approvals and restricting the number of interest only loans being issued. This had an immediate negative impact on the property market.
Around the same time, the Federal Labor Opposition Party had commenced dialogue around its preference for changes to negative gearing and capital gains tax regulations, along with a number of other measures that were certain to adversely impact on the property market. The perceived likelihood of a change of government in the lead up to the May Federal election and therefore the implementation of these policies, continued to impact on buyer and seller confidence in moving forward with their property ambitions. Uncertainty bred indecision.
Bank lending practices, although still quite stringent, are certainly more relaxed than those applied some 24 months ago. We now have a returned Coalition Government that does not support changes to negative gearing nor capital gains tax and that is seeking to deliver significant tax cuts across all sectors of the Australian population. We are also now experiencing further reductions in mortgage interest rates. All of these changes have contributed to a turnaround in market sentiment and are likely to kick start a new era of property price growth.
Will this be a sustained recovery?
There is only one essential ingredient missing from the overall property resurgence…and that is “stock”. Before vendors place their properties on the market, they need to be comfortable that there will be buyers in the marketplace and that those buyers will create a level of competition that will assure them of a satisfactory result.
Recent auction results will go a long way to providing this level of comfort and Bidpro believes that, come Spring, a lot more property will hit the market.
This resurgence of activity will be the start of the confidence building that inevitably leads to a strong, healthy property market. There are always economic factors that are beyond our control and prediction. However, given what we know right now, the future looks bright for property.
So where to from here?
To those who have been thinking of selling but putting off their decision…now is a good time! There are buyers in increasing numbers and there is a shortage of stock. Sell and buy in the same market and you rarely go wrong.
To those who are thinking of buying, your timing is perfect. Buying at the bottom of the market always leads to highly favourable investment outcomes, providing you are buying the right property at the right price.
Whether you are a buyer or a seller, if you are not confident with any aspect of achieving an optimum result, we recommend you seek our professional, independent advice.
This is an exciting window in the property cycle. If you play it right it has the potential to deliver substantial, long term rewards.