As we move into a new financial year, we are now experiencing a completely new market direction compared to this time last year. Many homeowners are watching in despair as prices correct, whilst others are taking advantage of new opportunities. In late June Matthew Shalhoub, myself, and Demore Mekari from Demore Lending explored a power shift to buyers looking to trade up and discussed the main factors effecting the market in 2022 and where we are heading.
Interest Rate Rises, what’s really effecting the market- Affordability VS Shock Value. It’s hard not to hear about interest rates in any sort of real estate conversation and given the recent interest rate rises have been the first in over a decade it’s no surprise that it’s been the focal point of the market shift. Price growth started slowing late last year almost in sync with imminent rate rise forecasts, and right on que we are now in a correction cycle with rates doing the same. But how much of this is owing to financial versus confidence? Given how aggressive the shift has been there is little evidence to support anything but a confidence shift in these early stages. The media plays a role in the housing market and the common narrative around the marketplace, so when there is a directional swing in the market, we find it compounds when fed by the news. What then usually follows is a slower paced stabilization period.
Last year in 2021 the market favoured the longer-term equity holders such as downsizers cashing in on record house prices and trading down into apartments or lower ticket properties. This year will be the best market for people looking to trade up. Property in the sub $1.8m bracket has only corrected marginally compared to houses in the $2m plus range, where some values have come back by 10% from the very peak momentum around October. Buyers who are now trading up are a couple hundred thousand better off and can opt more safely to sell first without the fear of chasing the market up. Another factor effecting land pricing which is having a spill on effect is the cost of building and materials. As the demand continues to outweigh supply, would be renovators and developers are factoring in this contingency into purchase price.
When there are negative factors such as interest rates and inflation there are always by-products in real-estate which is a very three-dimensional investment market. Rental returns are moving right up. Vacancy rates are at all-time lows and weekly apartment rents have gone up by as much as 15% in some areas. Investors have been on the side-lines for a long period, many seeking out better returns outside of Sydney but are now coming back into play. Downward cycles are nearly always less aggressive and shorter lived than upward is one thing to remember in Sydney
Demore Mekari from Demore Lending offers home consultations and is very popular with buyers looking to purchase around South Sydney. Click here for a free consultation.
If you are thinking of moving and would like to understand the market value of your home, how to add value and how to get ahead in this real estate market please get in touch.
- Billy Couldwell 0416 713 721