Unpacking the Current Sentiment in the Housing Market
Weekly Real Estate Market Update with Leigh Martinuzzi MPG
This week we’re in the housing market buyers are still showing a lack of confidence and urgency when it comes to buying. For some properties, enquiries remain up with offers to purchase still coming in, albeit some offers at lower prices than we would expect. This can of course be attributed to rising interest rates which is making it harder for most to get a home loan given the rising financial insecurity. We’ve seen several new properties come up for sale in recent weeks giving buyers more choices. Many sellers have held off from selling over the recent months to ride out the unstable market, with some now choosing to wait no longer. We normally see an increase in listings at this time of year.
Properties that show a very big wow factor, present well and are priced competitively are still seeing good offers being presented relatively quickly. Interest in the sub $800,000 price category remains high, while properties priced above $850,000 seems to be attracting less attention. Due to the increased interest rates, buyer borrowing capacity has reduced and offer prices on most properties are coming in about 5% under seller expectations. While many sellers hold firm with their asking prices there have been a few homes sold locally for what I’d suggest has been under market value. If more homes sell under value this can bring down local prices moving forward. It’s important to be patient in this stabilising market.
While the property market remains flat nationally, we have seen a slight improvement in some southern markets which I remain hopefully will see some more confident buyers come our way. CoreLogic’s head Tim Lawless suggests that the property market is still facing considerable downside risk. Although we may have seen an end to or close to an end of rising interest rates the lag effects might take a little while to be noticed. We’ve also got many mortgages coming on fixed rates in April which will no doubt put more financial pressure on mortgage payers.
Sydney prices have increased almost by 1% over the last 28 days. Melbourne and Brisbane’s prices remain fairly flat, up 0.2% and 0.2% respectively. I would expect once people start seeing positive movements, like what we are seeing in Sydney, more buyers will enter the market to purchase and offer prices may even start to improve. With more announcements around rate rise easing and the property market nearing or at the bottom, buyers will not want to miss out on the next up cycle. And with the amount of pent-up buyer demand, I think this is a very plausible outlook over the next 6 to 12 months. Savvy buyers will jump in before interest rates start to lower to avoid heavier-than-usual buyer competition when rates do start to drop.
In the building sector, rising costs, labour shortages and increasing interest rates are making it harder for many approved dwellings to go ahead. Build costs are up 17% over the past 12 months and the average cost to build a new home now is $415,000 and this will unlikely reduce moving forward. This may cause many buyers to move away from the new homes and instead opt for buying established homes. Although there were 187,000 building approvals to the year-end of January 2023, this is 33,000 short of where we need to be. With net immigration on the rise, we may expect to see this shortfall in building approvals place increased demand on established dwellings. While the immediate outlook remains uncertain, I am confident we will see a confidence return as we move through 2023.
AUCTION CLEARANCE RATES
- Queensland – 40% (242/1138)
- NSW – 61% (991/1466)
- Victoria – 63% (1074/931)
- ACT – 48% (116/83)
- South Australia – 63% (105/291)
- Tasmania – 67% (3/126)
- Western Australia – 36% (11/742)
- Northern Territory – 33% (3/24)
REVIEW(S) OF THE WEEK
Leigh is the most genuinely helpful person I have dealt with in the real estate business. He has helped us look for a new residence to suit our needs and his weekly market updates have kept us informed. I can highly recommend his services in the real estate business. – Buyer