Predicting the future of the property markets is a challenging task, especially when there are so many mixed messages and conflicting information available.
So welcome to this month’s Big Picture podcast where Pete Wargent and I explore the macroeconomic factors that are currently impacting the Australian property markets.
As usual, we'll cover everything from interest rates, inflation, consumer sentiment, and government policies, and explore how they affect supply and demand, property values, and market conditions and we’ll highlight the factors that we think you should understand.
Whether you're a seasoned investor or simply interested in the health of the property market, today’s show will provide you with valuable insights and expert analysis of the big picture.
If you would have asked me this time last year, I wouldn't have thought we would be talking about an inflation rate of close to 8%, 9 consecutive interest rate rises, and that the war overseas which had just commenced would still be raging.
And considering the upbeat state of our markets last year and the fact that we were emerging from Covid, I would not have thought Australian consumer confidence would be at historic lows 12 months down the track.
But here we are.
Predicting the future direction of our property markers seems to be more challenging than it has been for a long time.
There are so many conflicting messages and so much conflicting information out there.
On the one hand, we have experts who believe we are nearing the bottom of this property cycle citing factors such as supply and demand, strong population growth, and the fact that we probably have a past the peak of inflation.
And on the other hand, there are those who see a number of further interest rate rises that will cripple our property markets.
So let's look at what's happening now and start with consumer confidence.
- While property prices are still falling the rate of decline is reducing
- listing levels are very low.
- the auction markets have started the year strongly
- The property slump began in Sydney and then Melbourne even before the interest rate rises and spread around the country.
- The more expensive markets intended to see sharp declines while the more affordable segments of the market so greater resilience to increases in interest rates
- Apartments held their values better than houses.
- The pace of decline has been slowing since September.
- The rental crisis continues unabated.
- 2023 has commenced with record-high capital city rents and already low vacancy rates falling for both houses and units despite the usual impact on demand from the long January holiday season.
- China is no longer accepting degrees studied online or by correspondence.
- According to Dr Andrew Wilson, apartment brings have grown by almost 25% in Sydney over the last year and 22% in Melbourne and house rents have increased by almost 28% in Brisbane.
As we move into 2023, there continues to be a mix of headwinds and tailwinds for housing market performance.
- Metrics – can’t rely on just one.
- Asking prices are flat or rising
- Auction clearance rates held up well through Spring and into December
- Vendor metrics firm – days on the market and discounting
- Most borrowers have factored in higher interest rates.
- The top of the interest rate cycle is close.
- The top of the inflation cycle is close.
- Yields are increasing.
- Our strong population growth will underpin rental and capital growth.
- Unemployment levels remain at historic lows, which plays a role in serviceability, helping to keep a lid on mortgage arrears.
- Very low supply–supply–demand imbalance and no significant new supply until prices rise and developments are more financially feasible.
- The big headwind – fixed-rate mortgages converting to higher variable rates
Links and Resources:
Metropole’s Strategic Property Plan – to help both beginning and experienced investors.
Get a bundle of free reports and eBooks – www.PodcastBonus.com.au
Some of our favourite quotes from the show:
“The reserve bank expects headline inflation to take some time before it reaches its 2-3% target, in fact probably not till the middle of 2025.” – Michael Yardney
“A number of things are suggesting that the property market’s looking for a floor.” – Michael Yardney
“Unfortunately, some investors are thinking in the short term and selling up.” – Michael Yardney
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