Australia's property market has moved into the recovery phase of the cycle, with the whirlwind of activity over the pandemic era now a distant memory and a supply crisis now taking hold.
The supply and demand imbalance continues to put pressure on prices, so it's interesting that new data has revealed that the number of new listings hitting the market that were bought within the past three years has surged.
New PropTrack data shows that the share and the number of listings with a short turnaround have picked up over the past couple of years, after bottoming out during the pandemic, and are currently sitting around the highest it's been over the past five years.
These are the sellers who would have bought their property after the pandemic began in early 2020.
What’s interesting too is that while both the share and the number of listings have jumped, this isn’t just driven by owner-occupiers upgrading or downgrading, investors are also playing a major part in these numbers.
While it's not yet up at the level we saw in 2021, investors still account for around one-third of property listings which are being resold quickly.
And they also make up a larger share of newly listed properties in 2023 than they were through much of 2022 or pre-pandemic.
It could be assumed that the increase is due to interest rate increases and forced selling, and while that is happening, it’s not the key driver of these short turnaround listings.
PropTrack explains that the areas with the biggest increase in short-turnaround listings are areas where prices have outperformed in the recent period – a pattern that's consistent across the country.
So, while most parts of the country have seen an increase in the share of short-turnaround listings compared to what’s been typical in the past five years, the biggest increases are happening in areas where prices have grown the most.
Toowoomba, the Mandurah region in south-Perth, and Ipswich in Brisbane’s west are all areas that have seen significant property price growth… and a jump in short turnaround listings of around 8% more than over the past 5 years.
These areas have also all experienced strong price growth in the past year – up 7% or more, and nearly 11% in the case of Mandurah.
“It’s hard to see why higher mortgage repayments would be forcing people to sell only in areas where prices have grown, and not in areas where prices have fallen in the past year, or just grown more slowly,” Angus Moore, economist at PropTrack explains.
Moore went on to say,
“Similarly, the share of loans that are between 1-3 months behind on repayments remains low.
It has ticked up a little in 2023 from where it was in 2022, but it remains lower than pre-pandemic.
That’s not to say that mortgage repayments aren’t straining household budgets.
Sharply higher interest rates, many households rolling off fixed rates, and high inflation are all straining household budgets. That will make mortgage repayments a significant burden for many households.
But, at least so far, we haven’t seen signs that pressure is leading to swathes of households getting behind on their mortgage, or forcing people to sell.”
There could be a number of reasons that these short turnaround listings have jumped in these areas, many of which would imply sellers are being driven by price growth rather than mortgage stress:
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- Property prices have risen much faster than expected, meaning homeowners are able to upgrade quicker than usual.
- A retraction of the tree- and sea-change trend could be causing people to sell back up and return closer to the city.
- Investors are exiting softening rental markets amid interest rate squeezes and threatened changes to legislation that would make property investment less viable.
- Many of the suburbs that investors are selling out of are cheaper, lower socio-economic locations where investors bought for positive cash flow. With the 12 rises in interest rates, many of these investors would now be hurting.
Remember while homeowners don’t have to pay Capital Gains Tax, these investors who sell up will lose a fair portion of any gain they made over the few years they held the property in CGT, agent’s commissions, and selling costs.
But there’s nothing new about investors selling up early – long-term studies show that 50% of those who buy an investment property sell up in the first 5 years.
They’ve made the wrong decisions because they’ve been given the wrong advice, or maybe they didn’t receive any advice at all.
A simple lesson is to remember that property investment is a process and even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
Also… never chase or follow a trend, a growth suburb, or a hotspot.
Investing for cash flow isn’t a sound strategy for most investors.
Instead, focus on investment-grade property in an A-grade suburb because this is where you’ll find reliable capital growth and long-term returns.
As I said… property investing is a process, not an event.
Things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.
The fact is, the property you will eventually buy will be the result of a sequence of questions you will need to ask and answer and a series of decisions you’ll need to make before you even start looking at locations.
Long before we talk about a property or the right location with our clients at Metropole, we look at factors including their age, their timeframes, and the desired end results in other words, what do they really want the properties to do – are they looking for cash flow, capital growth, or a combination of both.