Market Perception Today
I had a recent email from a client, noting how she was unsure where the market was now or where it was heading. She commented that prices seem to be going up, and contemplated whether she should she hold off buying until the First Home Owner’s Grant (FHOG) reduces further and/or see if there is an impact of expected interest rate hikes?
I can only make comment of what I have seen in my patch of the woods, the East side of Brisbane. So let’s look at her first query – have Sellers increased their asking prices? Well, yes and no.
Up front it should be said if a property is priced to meet the market, it will sell. I have seen, even as of today, new properties listed at an attractive (or sensible) price, which I know will be snapped up quick.
I feel the problem with some new listings, is some Sellers have started to get a little greedy. That’s fine, I too would want to sell my house for as much as I could get, but if I wish to sell my house, I still have to meet the market. This principle will always remain no matter what the state of the market.
There has been recent press saying how the housing sector has bounced back extraordinarily well from the doldrums created by the GFC. I listed an article dated October 20 on this blog noting this very thing. Unsurprisingly, when a Seller sees this type of press, their eyes light up.
But first we need to look at where the press obtain their figures of growth? If it is via Government Departments (this is where database s such as PDS Live, RP Data gain much of their information) there will be a lag time. If a house sells in August, with processing time, the information may not reach a database until September to October. Keep this lag time in mind for the moment.
Personally I believe the turning point in the market was around July/August this year. Homes valued below $430,000 started to get picked up, and momentum increased. As properties in these lower brackets began depleting and confidence grew, Buyers started looking a little further up the price range and a ‘trickle up’ effect could be seen. However I haven’t seen this trickle up effect go much past the $550,000 bracket just yet.
Hence if the market was heating up in August, we hear about it in October (due to the lag time). Sellers start thinking it’s a Seller’s market and start upping listing prices.
Another interesting point I have noticed, is during this initial surge, the majority of interest was from Investors, not particularly first home buyers. They were certainly present, but the Investors seem to be the most active.
There will always be people who need to buy and sell property no matter what the market, due to external factors (say moving interstate for work) but Investors have the luxury of picking their mark. When they feel the market has bottomed out, they jump, as they of course wish to purchase at the lowest point to maximise their growth.
But have Investors interested in purchasing property already done so by now, and left the market, thereby reducing the Buyer pool for the Sellers just as they thought things were kicking along? I don’t think so. I still have quite a number of Buyers on my Database looking for investment properties, but they are specific and know what the right price should be. If you are a Seller and list too high, you may get good numbers enquiring as there is still much interest out there, but there will be no offers, and your property will sit.
There is also the theory by some the FHOG has artificially increased the costs of lower price bracket property. Having had few come across my path, I can’t see Sellers asking that much more because of a perceived flood of easy cash in the system. It’s just not happening.
If there are several interest rate hikes, the market may slow, possibly for a short period, but I feel most people are sensible enough to acknowledge interest rates are incredibly low, and there will be expected movement up. This is of course assuming the RBA and Lenders don’t get silly.
I was speaking with the local Loan Market Mortgage Broker, Simon Winters, who said his market felt the likelihood of interest rate increase in December was 50%, where everyone was saying 75% just a few weeks earlier.
Sellers pricing sensibly are selling quick as there is still much interest in the market. But list high and you will struggle for an offer. There are still plenty of keen Buyers out there, Investors and some new home buyers getting in before the FHOG reduces. Interest rates don’t appear to be making any dent. Similarly for Buyers, there are still many properties correctly priced in a market which appears to have recovered from the GFC. I don’t see a return to the 2007 times (which is a good thing) so all in all, at present, it is probably a reasonably equitable market.
Please feel free to leave a comment. Perception, by its nature, is an individual thing, so I am always interested in other people’s thoughts.
