Welcome to the Michael Yardney Podcast.
In today's monthly Big Picture episode with Pete Wargent, we'll be exploring a question on many investors’ minds:
Have the Australian property markets bottomed out and are they now on the verge of turning?
Today we'll be diving into the latest data, trends, and economic indicators, while also considering the broader implications for investors, homeowners, and the nation.
Whether you're a seasoned investor or just starting your property investment journey, you won't want to miss this episode, so join us for the next half an hour or so as we explore the factors that could potentially influence the future direction of the Australian property markets.
It's no secret that the Australian housing market has faced its fair share of challenges over the past couple of years.
- The economic fallout of the COVID-19 pandemic
- 10 consecutive interest rate rises
- Lowest level of consumer confidence in decades
- Continuous conveyer belt of negative messages in the media
- Tightening of lending restrictions
With official rates rising by 3.5 per cent, some commentators predicted property prices to plummet by 15, 20, or even 30 per cent, yet the Australian property markets have shown remarkable resilience in the face of ten consecutive interest rate increases by the Reserve Bank of Australia (RBA) between May 2022 and March 2023.
And now things seem to be changing.
Inflation seems to be falling, the RBA paused its aggressive interest rate rises, and at the beginning of April, all the major research houses reported an uptick in Australian dwelling values over the previous month.
So have the property markets bottomed out – are we moving into the next phase of the property cycle?
Let’s start with the question- Are rate hikes done?
Dr. Andrew Wilson’s My Housing Market reported the national housing market has continued to strengthen over March following its revival in February, with quarterly house prices now rising for the second consecutive month.
Proptrack Senior Economist Eleanor Creagh believes the end of interest rate rises are in sight and explained that limited supply, along with strong migration and higher rents, are underpinning property values.
Of course, there is not one property market.
Each state is at a different stage of its property cycle and within each state the submarkets are fragmented as each segment is affected differently by interest rates, the cost of living, and our economic challenges.
House prices are driven by many factors not just interest rates.
More important are consumer confidence and supply and demand.
Currently, demand for housing is booming driven by a surge in migration and the return of international students.
In contrast, the growth in dwelling supply is lagging, with building approvals for new homes at a decade low.
These issues are further hindering the growth of new dwelling supply.
The big four banks have all cast their predictions for the next few years of cash rate movements.
However, the RBA doesn't know what it's going to do - it decides each month and may continue to implement its current policy until it believes that the economy is stable enough to warrant a change.
Of course, it is possible that unforeseen events, such as changes in global economic conditions or domestic politics, may impact interest rate decisions in ways that are difficult to predict.
What indicators do we look for?
The type of things we look at pull into three main categories:
- Leading indicators
Leading indicators present economic data that point to the future direction of the economy and our property markets.
- Coincident indicators
Coincident indicators reflect the current state of the economy, showing whether it is in a state of growth or contraction.
- Lagging indicators
Lagging indicators take place after key economic events often confirming what has taken place on previous days.
We’re in the middle of a rental crisis with no end in sight.
There is no relief for tenants already facing record-high home rents, with weekly asking rents surging over March for both houses and units in most capitals.
Most capitals continue to report extraordinary increases in house rents over the past year with Brisbane top performer up by 20.6%.
Hobart annual house rents however have increased by just 1.4% with Canberra down 2.8%.
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 banks, well, they’ve not been particularly good at predicting interest rates, have they?” – Michael Yardney
“The next stage of the market is that buyers are going to come back in and similarly sellers are going to come in and put their properties on the market as they see the market moving forward.” – Michael Yardney
“Your inside world controls your outside world.” – Michael Yardney
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