After experiencing the strongest period of price growth ever recorded, the Australian market is now starting to slow. Year on year, capital city house prices are still up 6.4%, however they’ve declined by 3.5% since the start of the year. Why are prices not falling rapidly despite sharp increases in interest rates? Part of it is likely momentum in the market. Price growth doesn’t generally stop as soon as sentiment shifts and this is likely a driver of growth for now. The second is the inflation-proof nature of property and how this is impacting investor behaviour. Right now, we’re seeing very little evidence of investors trying to get out and lending to investors remaining high, despite the cost of financing increasing. While capital growth has stalled, rental rates are increasing which may balance out returns for many investors. Alternative investments to property are also being negatively impacted by high inflation and rising rates. Third: simple supply and demand. Population growth is starting up again at the same time that new development is stalling as a result of problems in the construction industry. While this has a more creeping impact on pricing, it’s set to become problematic over the next 12 months and is already showing up in rental growth. While the market takes a breather it’s important to reflect on historical trends in house price growth. House prices don’t zig zag in a regular fashion, pulling forward and backwards in equal measure, but rather operate in a more stepped pattern with strong surges in growth, followed by periods of either smaller declines in pricing or stability. This greater stability we’re seeing now is in many ways an easier market to transact in, whether you’re a buyer or a seller. Matthew Kidd Principal, Ray White Bensville/ Empire Bay WHAT’S HAPPENING IN OUR MARKET?
RkJQdWJsaXNoZXIy MTI3ODI1