As the winter is coming to an end, sellers and intermediaries are preparing for the first round of spring auctions on September 9, and more and more properties are being launched on the market.
This spring will be an important test for Australian capital cities and township markets.
First of all, how will the recent relaxation of loan conditions affect demand and sales prices?
It is a wise decision for the Monetary Authority to relax its lending restrictions on banks. In the past, these guidelines have been stifling the opportunities for borrowers to buy houses, preventing them from getting loans at all or obtaining sufficient credit to finance house purchases.
If all these buyers who were unable to enter the market in 2018 and 2019 attack again, will it lead to intensified competition? This situation seems to happen. Data from the Australian Bureau of Statistics in June shows that for more than a year, owner-occupied buyers and New loans for investment properties increased for the first time.
Secondly, will the two interest rate cuts (so far) prompt more people to return to the market this spring, so there will be more homes to choose from?
In Sydney and Melbourne, there is a third test. In June and July of this year, housing prices in these two cities have seen their first small increases since they peaked in mid-6. This shows that the market trend has reversed, or it is only caused by a serious shortage of supply and a 7% drop in sales.
I think the market has stabilized at a new level and buyers are happy to return to the market.
The unexpected result of the federal elections augurs well for the market to stabilize. Buyers believe that the price has bottomed out and will not face the risk of further price declines after purchase.
Similarly, sellers will be more confident to enter the market because there are more genuinely interested buyers competing for their properties.
The auction clearance rates in Sydney and Melbourne are a barometer of market health. The clearance rate once dropped to around 45%, but it has now risen to 70% to 75%.
As spring approaches, we are seeing increasing interest from buyers, but the number of houses currently on the market is still very small. The number of properties will pick up in the future, and it is expected that there will be enough buyer demand to meet a reasonable increase in the supply of properties.
As the low interest rate environment continues indefinitely, I believe that many first home buyers and upgrade buyers will be keen to buy houses in various cities and township markets.
The most in demand will be the highest quality properties. This spring, demand for better areas, urban areas, streets and properties will be strongest.
It will cost more to buy this type of house, but in terms of longer-term growth, if you spend more money on the initial investment, you will get better returns, that is, stronger capital appreciation.
Most people hold property for about 10 years. If you compare the annual capital growth rate of 5% for a set of properties and the 8% capital growth rate during the holding period, you will find that the gap between different properties is likely to widen, rather than narrow.
Therefore, this spring, high-quality properties should be purchased, focusing on location and orientation.
Especially in large cities, if you want the most capital growth, you should study some new infrastructure projects and determine which areas will benefit from road and rail improvements. In some areas, the time from CBD has been or will soon be shortened by 20-30 minutes, so in the next sales cycle, housing prices in these areas will soar.
For more details, please refer to: http://www.switzer.com.au/the-experts/john-mcgrath-property-expert/will-spring-bring-a-bounce-to-property-prices/
Author: John McGrath
John McGrath is considered one of the most influential figures in the Australian real estate industry and is the founder and executive director of McGrath Limited. He founded McGrath Real Estate Agency in a small office in 1988 and has now become one of Australia's most successful residential real estate groups, and was listed on the Australian Stock Exchange in November 2015.