Spring is almost always peak selling season – sellers are keen to offload their homes, buyers are more active, the sun is out and gardens are blooming.
What is apparent this year, is how quickly property market conditions have turned around. Prices are slowly starting to increase and we are looking at vastly different demand conditions from spring 2018.
Buyers are back and are experiencing ideal buying conditions. They have more cash to spend and are finding it cheaper and easier to get finance. The challenge buyers now face is that there are so few sellers. With listings remaining low, sellers are in a market of opportunity and should take advantage of the lack of competition.
We’re seeing unique conditions that are in many ways both a buyer’s and seller’s market. This supply and demand imbalance will result in price growth and a much more positive spring than last year.
After 12 months of uncertainty, vendors are increasingly confident they will sell their home.
There has been a 25% increase in searches on realestate.com.au over the past 12 months. The biggest jumps occurred following three major events. The first was the result of the federal election – the Coalition win provided greater certainty around tax incentives and led to improved market confidence. The second and third biggest increases in search activity followed the two most recent interest rate cuts. When there are buyers in the market, we start to see positive signs flow through to other indicators. Clearance rates in Melbourne and Sydney are particularly high and we are seeing early signs of price growth in premium suburbs across the country. Expect to see a ripple effect to other parts of the market throughout spring.
After two interest rate cuts, getting a home loan is now much cheaper than it was last year. This means people can borrow more, or alternatively, it makes their repayments lower. Search activity on realestate.com.au always jumps when there is an interest rate cut, likely driven by buyers becoming more confident. In the next 12 months, it is looking highly likely we will see another two rate cuts. Provided unemployment doesn’t rise rapidly, this low interest rate environment will continue to be positive for buyers.
The Australian Prudential Regulatory Authority (APRA) implemented restrictions around home loan lending in 2015.
Anyone looking to get a loan, particularly investors, would have found it a lot harder than previously. Once the Royal Commission was announced in December 2017 and the focus on responsible lending ramped up, it became even tougher to secure a loan.
So far this year, APRA has removed three restrictions to lending – the speed limit imposed on banks on investor lending growth, the cap on interest only loans and the 7.5% stress test imposed on borrowers. Banks are still cautious about lending and it’s likely the focus on responsible lending will continue. But in all other respects, access to finance will ease over spring.
Tax cuts came into effect at the start of this financial year. Although modest, they do put money into the pockets of most Australians and there will be further income tax cuts in four years’ time. With consumer confidence a big problem in Australia at the moment, more money in people’s pockets gives them an opportunity to spend (or save). It is likely that it will also provide some people with extra cash to spend on a home or even go a little way to helping make buying a home a reality.
The spring selling season may be slightly later than usual this year, but all indications suggest we’ll see a healthy spike in activity over the coming months.