{"id":2840,"date":"2022-06-17T10:27:11","date_gmt":"2022-06-17T10:27:11","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/australias-property-market-slows-further-as-pandemic-boom-wears-off\/"},"modified":"2022-06-17T10:27:11","modified_gmt":"2022-06-17T10:27:11","slug":"australias-property-market-slows-further-as-pandemic-boom-wears-off","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/australias-property-market-slows-further-as-pandemic-boom-wears-off\/","title":{"rendered":"Australia\u2019s property market slows further as pandemic boom wears off"},"content":{"rendered":"

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The slowdown of Australia\u2019s property market has worsened as rising mortgage rates and high property prices see buyer demand slump further, according to the latest PropTrack Housing Market Indicators<\/a> report.<\/p>\n

The report shows that demand<\/a> from prospective buyers continues to slip back from the extreme levels witnessed in 2021, as expectations of price falls dampen property buying activity amid an already seasonally quieter winter period.<\/p>\n

\"Buying<\/p>\n

In May, home prices fell for the first time since the pandemic onset, with Sydney<\/a>, Melbourne, and Hobart seeing activity cool more quickly than Adelaide and to some degree Brisbane.<\/p>\n

But, activity has now begun to slow in both these markets, indicating that they will likely not be immune to price falls later this year.<\/p>\n

In fact, smaller capitals are benefitting from preference shifts toward larger homes, as well as affordability advantages and workplace flexibility.<\/p>\n

Meanwhile, regional areas<\/a> continue to see a constrained stock of available properties for sale, while demand per listing remains higher, which is supporting price growth in these markets.<\/p>\n

Here\u2019s a closer look at the key trends.<\/p>\n

Sales volumes slip<\/span><\/h2>\n

\"Fig01\"

Sales volumes peaked in December last year, but throughout the first quarter of 2022 preliminary weekly sales volumes nationally were tracking at a very similar pace to the first quarter of 2021.<\/p>\n

Preliminary weekly sales volumes so far this year are 7% lower than over the same period in 2021 but remain 53% higher than the same period in 2020, the data shows.<\/p>\n

However, on a monthly basis, national sales volumes rose 3.7% from April which was disrupted by long weekends.<\/p>\n

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\u201cThe combination of rising mortgage rates and already high home prices is eroding affordability. <\/em><\/p>\n

With expectations of continued price falls, prospective buyer demand is moderating,\u201d <\/em>Eleanor Creagh<\/a>, senior economist at REA Group and author of the report, said.<\/p>\n

\u201cThis is seeing transaction volumes slow relative to the record high volumes seen through much of last year.\u201d<\/em><\/p>\n<\/blockquote>\n

And the sliding sales volumes are seen across the board, too.<\/strong><\/p>\n

To date this year, sales volumes are off to a slower start compared to the same period last year in Victoria (down 10%), Tasmania (down 10%), New South Wales (down 14%), and Queensland (down 2%).<\/p>\n

However, they are outpacing the same period to date last year in the ACT (6%), Northern Territory (8%), South Australia (1%), and Western Australia (10%).<\/p>\n

\"Fig02\"

By city, Hobart (down 13%), Sydney (down 11%), and Melbourne (down 7%) have seen the greatest deceleration in activity compared to last year, with moderating buyer demand weighing on sales.<\/p>\n

Meanwhile, sales volumes have most significantly gathered pace in the capital cities of Perth (up 13%) and Darwin (up 29%), most likely due to reopened state and international borders combined with tight rental markets fuelling demand.<\/p>\n

Meanwhile, Brisbane had been tracking ahead of 2021, but to date, this year’s sales volumes are now 4% when compared to the same period last year.<\/p>\n

And Creagh expects sales volumes will continue to slow as reduced mortgage affordability weighs on buyer demand \u2013 particularly as we enter the seasonally quiet winter months.<\/p>\n

Search volumes decline<\/span><\/h2>\n

\"Fig03\"

Search activity slowed again in May with national search volumes falling 3% from last month\u2019s levels and down 10% year-on-year.<\/p>\n

Interestingly, the data shows that search activity is easing Australia-wide, and volumes fell in every state, except the Northern Territory, over the past month.<\/p>\n

Tasmania recorded the largest month-on-month decline (-2%).<\/p>\n

Compared to May last year, search volumes are lower in New South Wales<\/a> (-11%), the Australian Capital Territory (-10%), Victoria<\/a> (-9%), and Queensland (-2%), but remain higher in Western Australia (8%), South Australia (5%), and the Northern Territory (2%).<\/p>\n

What\u2019s next for Australia\u2019s property market?<\/span><\/h2>\n

Rising mortgage rates, affordability constraints, an increase in the number of properties for sale, and the expectations of more rate hikes have all seen the housing market rebalance significantly since last year.<\/p>\n

At its May meeting, the RBA raised the cash rate by 25 basis points for the first time in more than a decade, before raising interest rates a further 50 basis points to 0.85% in June.<\/p>\n

And it is widely expected that the rate rises will continue over the course of this year.<\/p>\n

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\u201cThis was the first back-to-back rate hike in 12 years, with the board highlighting their commitment to \u201cdoing what is necessary\u201d to rein in inflation pressures. <\/em><\/p>\n

It\u2019s a clear signal of a faster phase of tightening with front-loaded rate hikes incoming,\u201d <\/em>Creagh said.<\/p>\n

<\/blockquote>\n

It is this combination of higher interest rates, rising mortgage rates, and already high home prices which is eroding affordability.<\/p>\n

Meanwhile, expectations of continued price falls are causing prospective buyer demand to moderate.<\/p>\n

Last year was a seller\u2019s market and overwhelmingly so, while this year\u2019s continued strength in new listings has seen a lot more choice for buyers, Creagh pointed out in the report.<\/p>\n

And Creagh expects the continuation of slower demand and lower activity will cause price growth to moderate from the exceptional pace we\u2019ve seen over the last year.<\/p>\n

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\u201cFrom here, the magnitude and timing of further interest rate increases will be the key decider in the ongoing loss of momentum in housing market conditions,\u201d<\/em> she said.<\/p>\n<\/blockquote>\n

What does this mean for buyers and sellers?<\/span><\/h2>\n

For buyers, the balance in market conditions could make it easier to get into the market.<\/p>\n

There is a lot less competition, the stock isn\u2019t moving as quickly and the fear of missing out has subsided, Creagh said.<\/p>\n

\"Property<\/p>\n

But she warned that buyers should bear in mind that borrowing costs are on the rise and the recent period of exceptional price growth is at an end, with prices beginning to fall in some places.<\/p>\n

For sellers, she advises that it\u2019s time to reset price expectations and be mindful that your property may take longer to sell with fewer competing bidders.<\/p>\n

So is it the wrong time to buy a property?<\/span><\/h2>\n

Do you know those people who are always waiting for the optimal time to buy a property?<\/p>\n

They either wait and wait until everyone else starts buying or they wait and wait and ultimately do nothing at all.<\/p>\n

The thing is each of those strategies is as silly as the other.<\/p>\n

You might think that is a little odd because surely buying something is better than buying nothing at all, but you\u2019d be wrong.<\/p>\n

That\u2019s because buying when everyone else is, when all your friends tell you it\u2019s the right time or when the media tells you it’s time, often means you\u2019re driven by FOMO (fear of missing out) which sometimes means the property you buy is overpriced or possibly inferior.<\/p>\n

\"Price<\/p>\n

On the other hand, buying nothing at all doesn\u2019t improve your financial situation either, and the people suffering from analysis paralysis generally struggle to ever take the next step to, you know, actually buy something.<\/p>\n

So, while these two examples might seem a little extreme, they do in fact reflect a huge cohort of Australians keen to stake their claim in the real estate market.<\/p>\n

They either buy at the wrong time or they don\u2019t buy at all.<\/p>\n

In contrast, savvy property investors understand that the best time to buy is when they can afford to do so, regardless of the market conditions.<\/p>\n

Now that may seem counter-intuitive to my point about people buying at the peak of the market who generally overpay.<\/p>\n

However, smart investors recognise that there are a number of capital city markets around the country experiencing different market conditions at the same time, so they opt to buy in the right property markets – not necessarily in their backyards.<\/p>\n

Unfortunately, there are far too many buyers out there who devote far too much time trying to time the market.<\/strong><\/p>\n

That is, they try to pick the moment just before a market is going to strengthen.<\/p>\n

The truth of the matter is that unless they are property investment experts, they are unlikely to ever achieve that.<\/p>\n

In fact, even professionals get it more wrong than they get it right!<\/p>\n

Ditto, with the bottom of the market.<\/p>\n

The thing is, when people talk about market timing as a strategy, they don\u2019t really know what they\u2019re talking about!<\/p>\n

They have confused time in the market with market timing because it is always the ability to hold a property for the long-term that will produce results.<\/p>\n

The bottom line<\/span><\/h2>\n

While you can make money when you buy by recognising the potential to add value that others do not, that is dwarfed by the capital growth you can achieve by holding an investment-grade property for many years.<\/p>\n

When you look back in 10 years\u2019 time the market condition that you bought it will be a distant memory \u2014 but there will be plenty of people still on the sidelines naively waiting for the perfect time to buy.<\/p>\n