What is happening in the property market and what’s next?

The property market is forever changing but over the last 12 months we have witnessed more radical change than we have ever experienced before.

The demand for property during 2020 – 2021 caused significant demand for property resulting in an increase in prices across the nation. Record highs were recorded as Australian home values rose by 25% between March 2020 and February 2022. 

This was due to record low interest rates, high household savings, government grants, a shortage of homes for sale and an insatiable appetite for bringing decisions forward due to lifestyle choices and a new landscape for working remotely.

Buyers were desperate to purchase and some even bought homes sight unseen during lockdown periods. Sellers had all the power until they sold and then became buyers themselves. 

Towards the end of 2021 property prices were peaking and the pace at which prices were increasing was no longer sustainable.

In 2022 inflation became an issue that could not be ignored. It was up to a 20 year high. 

In May 2022 the Reserve Bank increased the official cash rate by 0.25%. This was the first rate increase in close to 12 years. A further eight consecutive rate rises took the cash rate from 0.35 per cent to 3.10 % causing a shift in attitudes nationally. 

Uncertainty was in the air. Everyone was talking about the property market. More and more properties were sitting on the market for longer as sellers had to realise the only thing that would help sell their home was to be attractive to the buyers that were prepared to buy and a reduction in price was necessary.

Buyers had less borrowing power and some were priced out of the market they wanted to buy in all together.

In record time the shift spread over every capital city in Australia meaning buyers had more power to buy from anxious sellers. Confidence was slammed due to interest rate hikes, rising inflation and negative media reports about the property market dropping.

What you may find interesting, is the fact that over the past five years, most property prices have doubled. 

Here’s a look at what’s happened to property prices since the pandemic began:

CHANGE IN HOUSE PRICES DURING THIS PROPERTY CYCLE

This shows that prices in every capital city are significantly higher now than they were in 2020 before the boom. When measured long term, house prices tend to go up more than they go down. 

On average, an upswing of prices in the property market normally lasts for 2-3 years, with a 32.7% price increase from peak to trough, while on average, downturns will see a 3% decrease in prices over several months. Which is why, time in the property market is more important than timing the property market.

As the 2023 property market gets set to start up, there are new opportunities emerging. 

Next week the Reserve Bank will hold its first meeting of 2023 where it is expected to increase interest rates again in an effort to curb inflation before it becomes out of control.

This news brings more uncertainty amongst buyers and sellers who may be considering making a move.

The property market will be tested but this is not the only factor that influences home prices. Wages, income growth, population and the return of foreign migration will play a vital part as well.

Financial pressure is being felt by many homeowners and those that are wanting to get into the market. This can lead to making hasty decisions that may be wrong and that’s when mistakes can happen.

If you want to know how much your home is worth but don’t want to speak with a real estate agent, I have put together a short video series to show you how you can do your own property appraisal using my free property appraisal tool.

I’m doing this to help people get the information they need, (without unnecessary pressure) before they make a bad decision.

Register HERE to get your copy