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What can we expect from the property market for the remainder of the year? – November Property Market Update

By Andrew Macdonald

We’ve started to see the RBA ease the pace of interest rate hikes, which has helped to shift the tone of what we can expect for the rest of the year.

What can we expect from the property market for the remainder of the year?

Conditions are easing

The mix of interest rate hikes, strong inflation levels and high household debt has understandably had a significant impact on consumer sentiment.

However, we’ve started to see the Reserve Bank of Australia (RBA) ease the pace of interest rate increases which has helped to shift the tone of what we can expect for the rest of the year…

We’re noticing that conditions are easing, with rising auction clearance rates, consumer sentiment improving and with supply normalising from its record low, providing buyers with more diverse choice, and the opportunity to negotiate.

With rising overseas migration and short-term visa holders returning, we’re also starting to see an improvement in investment activity which, in time, will also provide more rental opportunities.

Homes are still worth more than they were prior to COVID-19

According to CoreLogic, Sydney home values are down –9.5% since May, and -10.1% since peaking in February this year.

However, despite the -10.1% decline so far, Sydney home values still have a way to go before wiping out the capital gains accrued over the recent growth cycle. Home values would need to fall a further -11.4% to get back to the levels seen prior to COVID-19.

Nicola Powell, Chief of Research and Economics at Domain, told SBS News that:

“While house prices have “rapidly fallen” over the last few months, they remain significantly higher than what they were before the recent pandemic property boom.”

Sydney dwelling values since January 2020:

House price decline is slowing down

Home prices have fallen, but the rate of decline has slowed, especially in Sydney.

According to CoreLogic, the good news for Sydney homeowners is that the rate of decline has continued to moderate through October, improving from a -2.2% decline over the four-week period ending September to -1.3% over the most recent four-week period ending October.

The more gradual pace of decline coincides with the typically busy spring season and the warmer weather.

Is now the time to buy?

While property prices and stock on the market may be lower, buyers who can afford the higher interest rates may benefit from lower house prices.

Head of home loans, James Sheffield encouraged buyers to think long-term when it comes to navigating the property market. He said:

“Picking the peaks and troughs is difficult and depends on your objectives and time frame. If your objective is to buy a home to live in, then you don’t need to worry as much about short term changes in value – just focus on finding a home you like at a price you can afford.”

The positive benefit for first-home buyers will be that they won’t have to spend as long saving for a deposit. They’ll still need to service the loan on higher interest rates, but at least the deposit hurdle will become less testing.

What if you’re a seller?

When a market is slowing down, if you’re a seller, and you sell your home, and then you perhaps don’t secure your property for another one or two months, what you may find is your dollars go that little bit further as the market is expected to continue to fall.

Have an obligation-free property appraisal with one of our agents and we will provide you with an estimate of the current market value of your home, including a summary of your property, recent sales of comparable properties and listing activity in your area and real-time market insights to help you make educated decisions.

Understanding how much your home is worth can help you make smarter financial decisions by knowing your net worth.

The outlook for the housing market

Property prices may continue their downward trajectory until the peak of the cash rate rise is reached. Financial markets are predicting that the cash rate may reach its peak in the first half of 2023.

However, between the impact of seasonality and homeowners increasingly reassessing whether or not to list their homes, we’re seeing that the pace of price falls is easing and that the absolute worst of the downturn is behind us.

The money market analysis modelled that house prices were about 7% above their expected trend values as of the end of last year – this was modelled on various economic and demographic factors such as income, credit rates, population and interest rates.

On a longer-term time horizon, it’s anyone’s guess. Plenty of forecasters have been wrong about the Australian property market over the past five years, some to the upside and others to the downside.

With so much in the world in flux, it’s impossible to know how it will all play out!

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