Auction buyers aren’t as excited as they were last year.
Playing the board game ‘Risk’ when I was younger taught me just how far Australia is from the rest of the world.
But the conflict in Iran and the flow-on effects of the oil crisis, now filtering through to all walks of life and putting a rocket under inflation, makes it feel like we are right in the thick of the action.
The prices of petrol, energy and food have all been affected. Households and businesses are on the ropes. And that’s on top of what was already a cost of living crisis.
Finally, there’s our favourite asset. Real estate.
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For more than 50 years, Australia’s property markets have moved in cycles. A growth period, followed by a plateau, a correction, a recovery and then the next growth period.
Occasionally, major world events can cause a ripple in the ocean, but never a tsunami. Even in the GFC of 2008, property values fell by less than 4 per cent, before a recovery, then three growth cycles.
Current global uncertainty and volatility will affect our real estate. But don’t expect a seismic shift.
Tim McIntyre at home with wife Simone du Toit and their sons Jack and Tommy. Picture: Max Mason-Hubers
Inflation will continue to surge in the short term and we can expect more rate pain from the RBA. Higher rates will take potential borrowers out of the market, easing demand pressure. However, our severe supply shortfall will mean value growth will slow or stop, but it won’t fall significantly.
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SQM Research recently downgraded its housing forecast capital city values over the next year from 6-10 per cent growth prediction, to 0-3 per cent.
The most notable changes were in Melbourne, where the 4-7 per cent growth forecast now -4 to -1 per cent; and in Sydney, where 3-6 per cent growth is now at -6 to -2 per cent. Value growth is still forecast for all other major capitals and regional centres.
PropTrack’s latest Home Price Index showed growth in all capitals in March. Annually, national growth passed 9 per cent.
The fundamentals that drive real estate values point to growth at the moment. That is, there is more demand than supply.
But markets of all kinds hate uncertainty and people are hesitating to make their next move.
All of a sudden, auction clearance rates have dipped below 50 per cent as buyers retreat to the sidelines to see what happens next.
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The same thing happened in the first month of Covid. The market stalled and prices dropped for a few weeks. After that, values went up by more than 30 per cent over the next year.
The upside may not be as steep this time, but this current flat period means buyers who are able to get into the market now have an opportunity.
Rates may rise and inflation may worsen. But if you can weather the storm, there is value to be had by buying now.
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