Passing peak fear
The Australian housing market has passed its 'peak fear' phase, and the consistent improvement in auction clearance rates shows that the market is more balanced between buyers and sellers, according to Pete Wargent, co-founder of Australia's first national property buyer's agency network, BuyersBuyers.
Mr Wargent said, "there's no question that the series of interest rate hikes knocked the stuffing out of the housing market earlier in 2022. That, combined with improved auction clearance rates, indicate that the market is more balanced, especially when it comes to high-quality properties in popular areas".."
"There hasn't been a tightening cycle of this pace and magnitude since 1994 – when the cash rate target went from 4.75 per cent to 7.50 per cent between July and December - so most young borrowers have never seen anything like this before, and it had a very significant impact on consumer confidence".
"However, the Reserve Bank only hiking 25 basis points this month has had something of a soothing impact on buyer confidence – although there will likely be further hikes to come, it does add to a general feeling that we are getting closer to the terminal cash rate target for this cycle".
"After months of gloomy headlines, eventually consumers tend to tire of hearing the same old messages and move on, particularly in the absence of a major property price correction, and a lot of buyers are doing just that now. At some point you just have to choose to get into the market" Mr Wargent said.
Prices off their highs
BuyersBuyers CEO Doron Peleg said that capital city prices are now approximately 6 per cent below their peak, according to CoreLogic's home value index, and the index would still show some further declines to come.
There has also been a steady and consistent improvement in the auction clearance rate. Based upon BuyersBuyers data and anecdotal case studies in relation to high-quality properties in popular areas enjoying strong demand, our findings indicate that the market has become more balanced between buyers and sellers.
Mr Peleg said, "with Australia experiencing full employment, many prospective vendors can wait out the downturn, given most owners have built up significant equity, have substantial cash buffers, and given that rents are rising by up to 20 per cent per annum".
"Property market indices tend to lag, because there's always going to be a delay between offers being made and property sales being settled, recorded, and reported. So price indices will likely show further declines for some time to come yet" Mr Peleg said.
Mr Peleg said, "CoreLogic reported the highest preliminary auction clearance rate since May this weekend, driven by improving buyer sentiment in Melbourne and Adelaide, as well as less stock flowing on the market."
"Brisbane's house prices are seeing some of the speculative excesses wiped away this year, but we've also seen unit and townhouse prices rising in many cases."
"There are still some areas of weakness in Sydney, but stamp duty being scrapped for first homebuyers up to the $1.5 million price point in the new year will likely see a recovery driven from the bottom of the market up," Mr Peleg said.
New year brings new demand
BuyersBuyers co-founder Pete Wargent said immigration into Australia may top record highs over the next couple of years, with the annual permanent migration cap being lifted to 195,000.
Mr Wargent said, "the market has been a little segmented recently, but speaking to our buyer's agent and industry connections in Melbourne shows that well-presented properties are garnering plenty of interest, and even competitive bidding in some cases."
"The downturn has been driven by a combination of lower borrowing capacity and deeply negative sentiment, but we can expect to see some of the gloomier headlines tailing off now, which leads us to believe that 'peak fear' has now passed for this market cycle."
"With the borders open and permanent migration ramping up again in tandem with the return of international students and other temporary visa holders, we expect to see the resident population of Australia increase by 1 million over the next 2 to 3 years. And this at a time when the statistics are threatening to show builders could be going insolvent at the fastest pace on record, hampering the supply response" Mr Wargent said.
"Naturally, we do expect lower borrowing capacity to impact some buyer cohorts, including first home buyers, some investors, and particularly upgraders who are really stretching themselves to buy the best home they can. But the doomsday scenarios favoured by some media outlets are looking increasingly unlikely."
"We've passed peak fear," Mr Wargent said.
