Where is the Property Market Heading?

There is mounting concern in property markets around the country with multiple articles written and released this week discussing instability in the real estate market.

Whilst we are still seeing some incredible results here on the Gold Coast, the facts presented to us show that we are moving in to some significant headwinds that can't be ignored.

Future sellers should be aware of these issues so that they can adjust if necessary and take advantage of today's conditions.

Whilst interest rate movements are a key component in price rises and falls, there are other fundamentals that are crucial in any property cycle.

.Of these fundamentals, arguably one of the most important is consumer confidence.

Whilst surveys show Australians are generally positive about the future, the latest Sydney Morning Herald figures this week show that an overwhelming number of Australians believe that today is the worst time since the beginning of the Global Financial Crisis in 2008 to buy a property. This is no doubt due to looming interest rate rises and affordability constraints as well as the almost universal acknowledgement that we are either at or past the peak of the current cycle.

Here on the Gold Coast, we have another significant factor that will be discussed more broadly as we move forward.

The recent floods which have created havoc across South East Queensland and Northern New South Wales have the ability to place severe pressure on future insurance costs, building material costs and labor costs. All of these factors will weigh heavily on property in the short to median term by forcing many potential buyers to delay or withdraw from purchasing, particularly investors and home renovators.

Another key factor in price momentum is the looming Federal election which will take place in May.

Elections have always slowed the real estate market and once an Election date is set, history says that the market will slow.

Speaking of Federal elections, a final point today comes from a trip that I took this week to the Ray White Canberra business.

Ray White Canberra is one of the best businesses in the Ray White network and over the last few weeks they have have witnessed a considerable shift in the market.

Up until a couple of weeks ago, buyers in their marketplace were still offering more for a property than a seller was asking, creating strong competition and pushing prices up with many records being broken.

In the space of two weekends, they are now seeing a substantial gap between what a seller wants and what a buyer is prepared to pay. Inspections numbers and sales have dropped considerably and buyers are now more concerned about paying to much in a falling market than they are about missing out.

The question that we need to ask ourselves is not if it will happen on the Gold Coast, but when will it happen on the Gold Coast?

Interesting times are ahead....

Our lead story last week again focuses on interest rates. One of the big fours banks, the NAB, are now forecasting three interest rate rises before Christmas. What impact could this have in our marketplace?

Please see the full article from the Australian Financial Review below.

Interest rates to rise three times by Xmas: Big Four bank

One of Australia’s biggest banks expects the Reserve Bank to hike interest rates three times in quick succession, taking the cash rate to pre-pandemic levels by Christmas, as the economy picks up.

The National Bank of Australia also warned it saw a further six interest rate hikes coming off RBA in the two years after 2022 to reach a 2.25 per cent cash rate target by the end of 2024.

NAB changed its outlook on interest rates as the economy continues to “outperform our expectations” with strong domestic forecasts, including unemployment falling below 4 per cent this month and 3.5 per cent in the second half of the year.

“We now see the first RBA rate rise occurring in August (15bps) with further increases in September (25bps) and November (25bps),” the NAB Economics report said.

“This will see the cash rate target back to pre-pandemic levels of 0.75 per cent by the end of 2022.”

And it said as RBA bond holdings matured “we see a further six hikes over two years – which sees the cash rate around 2.25 per cent by the end of 2024”.

The outlook was in contrast to the The Commonwealth Bank’s Economic Insights team being more conservative, expecting “a shallow tightening cycle ahead”.

“We expect the RBA’s tightening cycle to commence in June,” the CBA global economic and markets research paper said. “We expect the RBA to lift the cash rate to 1.25 per cent by Q1 23 and hold it there over the rest of our forecast horizon which extends to end-2023”