- Consumers are hesitant amid inflation and potential interest rates increases.
- But the market is far from healthy. There simply aren’t enough homes in NSW.
- A healthy market offers opportunities for all buyers plus choice for tenants
Tim McKibbin, CEO, Real Estate Institute of NSW says “The market will soon return to normal operation and when it does, we expect conditions to resemble that of late 2022.”
While the latest Domain data shows a slowing in the house price slump, with a decelerating decline, this price cycle still remains about $204,000 higher than the mid-2020 trough. That, plus a 7.8 inflation rise and looming interest rates announcements from the Reserve Bank of Australia (RBA), mean buyers are concerned about the rising cost of living.
McKibbin said “The market drivers remain the same: demand is robust yet buyers remain cautious not to overspend.
“There’s hesitance among consumers owing to the general uncertainty around inflation, interest rates and the potential for more increases, and the impact of the war in Ukraine on energy and food markets.
“Some vendors are taking a wait-and-see approach to see where values land.” he said.
April the time to buy?
McKibbin points out that it has been widely predicted that there will be a lot of distressed sales commencing in April. But how that plays out will be dependent on how the RBA and Government manage inflation and how the banks assist mortgagors.
Another variable is the 2023 NSW State election on Saturday, 25 March.
McKibbon said “The upcoming state election is another variable which could serve to temper market activity as the major parties use the housing crisis as a platform to engage in one-up-manship in a last-minute scramble for votes.
“Rather predictably, announcements designed to appeal to the populace are taking
precedence over proper policies with the potential to effect necessary change.” he said.
Voters are concerned about the Australian Bureau of Statistics calculation that inflation saw it’s fastest rise last year since March 1990. Resolve Strategic research shows cost of living tops NSW voters’ concerns. Thus, soaring living costs will dominate the NSW election campaign, with 93 per cent of voters nominating rising prices – particularly for fresh food and groceries – as their top concern ahead of the March 25 poll.
Investor caution amid housing crisis
MicKibbon confirms There has been plenty of speculation about the behaviour of investors this year.
With eight straight RBA cash rate increases last year and more likely on the way, market uncertainty has impacted house prices, which have plummeted 5.18% from their pandemic peaks in capital cities, according to data from PropTrack.
But McKibbon has faith in the possibility that rates will ideally stabilise at some point – hopefully soon.
“And a return to price growth is a possibility in the short to medium term,” he said.
But even with buyer demand solid, the scarcity of property on the market will have little chance of easing, with almost record rates of immigration contributing to lack of housing.
McKibbon said “Some have suggested these factors will encourage investor activity but the question is, what are they going to buy? The lack of supply of homes for people to buy and rent is the crux of the housing crisis and no amount of pro-tenant legislation and anti-landlord rhetoric will address this.
“Auction season will resume in full in coming weeks and it will be interesting to see if
clearance rates pick up where they left off. Last year ended in encouraging fashion with
value on offer for buyers and fair prices achieved by vendors.
“But the market is far from healthy. There simply aren’t enough homes for people in
NSW. A healthy market is one which offers opportunities for all buyer cohorts as well as
choice for tenants” he said.
