What will the new financial year bring for property?
The new financial year heralds a time for change and new things, and this may be particularly true for the Australian real estate market this year.
Not only is the market demonstrating signs of shifting conditions and changing dynamics between buyer and seller, but recent legislative changes related to housing (which commenced on July 1) may further change the way Australians approach property transactions over the coming financial year.
Return to seasonality
The latest CoreLogic Home Value Index has shown a slight recovery from the slower results recorded in May, where dwelling values fell 1.1%. In June, CoreLogic recorded a 1.8% increase in dwelling values over the month.
CoreLogic suggests that despite the short-term recovery, signs are pointing to less steam in the market.
I am of the view that we may see the first ‘real’ real estate cycle kicking in over the coming months, and we may experience a more seasonal market. Strong market conditions, buyer demand and cheap finance mean we haven’t really seen distinct differences in seasonal activity over the past few years, however, a traditionally quiet winter market appears to be emerging.
We are seeing less people at auctions, and less energetic bidding conditions. Clearance rates are trending downwards. While this may be perceived as a negative by some, I believe buyers may be faced with better prospects for property purchases in some situations.
A quieter winter season can actually be a good time to buy, as many are turned off venturing out to open homes in the cold or wet, and there may be less competition when inspecting a property. Not only this, you may be able to see a property in a truer light, or even note how it holds up in less-than-favourable weather conditions. This scenario may help you accurately value a property and decide what you would pay for it.
It is likely that spring this year will see the traditional increase in stock that is characteristic of the season in real estate, particularly with an influx of completed apartment complexes filling supply lines in some markets.
First home buyer legislation
Recently released data from the 2016 Census shows that home ownership rates have declined, from 68.6% in 1991 to 65.5% in 2016.
In a bid to improve prospects of home ownership, the Victorian and New South Wales state governments introduced new measures to assist first home buyers, including the removal of stamp duty concessions, and grants for builders and purchasers of new homes up to a specified thresholds. These came into force on 1 July 2017.
As such, there has been talk about first home buyers re-entering the market from July and becoming a bigger force to be reckoned with.
I encourage first home buyers to balance the short-term benefit of concessions with a smart, long-term investment decision. It is important not to rush in and buy any property for the sake of getting into the market or utilising concessions. They should carefully consider their financial positon now and if rates changed in the future, and ensure that the property they purchase sits within a predetermined budget that takes these factors into account – not just short-term concessions.
Shift to buyers’ market
It appears that the market is shifting in favour of buyers. While the outlook may be looking a little cooler, there is still a solid, underlying demand for property. Sellers may have to work a little harder to make their property stand out, and when the offers roll in, they may have to be more open to negotiation in reaching an acceptable outcome between parties.
It will also pay for buyers to remember that the financial year ahead may hold the potential for rate increases. While we cannot predict movements with certainty, rates can move quickly and I remind Australians to plan for such scenarios to ensure they don’t come under future financial pressure in a changing market.