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Are property prices going to continue to decline? Or have we reached the bottom of the market a lot sooner than many experts predicted?
Mark Bouris sat down with Channel Nine’s Today Extra hosts to discuss all of the latest predictions about Australia’s property market, and to answer the all-important question: is now the right time to buy?
Bouris said one of the important factors contributing to the property market decline is consumer sentiment: “Many people, when they go to auction, are reading about this sort of stuff and buyers at auction are making a decision not to make a bid. As a result of that, a lot of auctions are now passing in and buyers are trying to negotiate much lower prices.’
Crucially, Bouris said that vendors aren’t necessarily feeling an immediate pressure to sell at auction.
“The number of real estate agents that I have interviewed have told me they’ve seen very little in terms of distressed sales,” said Bouris.
The Reserve Bank of Australia (RBA) predicted earlier this year that they expected house prices to fall around 15% on average, but Bouris was quick to play down this prediction.
According to Bouris, the RBA did not “guarantee” that this would occur.
He said three factors will impact the demand for property and thereby likely stabilise property prices:
- Immigration levels: “The increase in population we will see as a result of immigration next year” will create further demand in both the rental and property market.
- Construction: “The reduction in the supply of housing as a result of it being more difficult for developers to develop land and then onsell the land, because property is not as lucrative at the moment.”
- Rental market: Across Australia, certain markets are currently experiencing large increases in the cost of rent.
Bouris said these three factors are actually “pushing people to consider buying property and is probably going to do two things. It is likely going to increase the demand for housing and at the same time, there will be a reduction in the supply of housing. So that might, to some extent, stabilise this reduction in house prices many have predicted.”
Home Loan Trends following months of rate rises:
Bouris was asked about how much more difficult it has been to get a home loan for prospective home buyers. He offered:
“The basic trend we’re seeing at the moment is fewer people are applying for loans, and lenders are approving a lot less per loan application. Right now we’re seeing loan applications for between 15 and 20% less than what people would have been able to apply for a year ago.
“So if I applied for a million-dollar loan one year ago, I can now only get a loan for $850,000 on exactly the same income. So I can therefore pay less at the auction or I can pay less at the private treaty. That can only do one thing: bring house prices down.
However, that’s not the only factor impacting property prices, and Bouris pointed out that whilst auction clearance rates have been declining for a while, the number of houses clearing at auction in recent weeks is “now stabilising.”
But why?
“Because I think that buyers have realised that there’s no distressed sales,” said Bouris.
“There is a narrative out there suggesting ‘oh, house prices are going to fall’, and then buyers get onto this narrative and buyers think ‘I’m gonna get a bargain’.
“Buyers now are coming to the view, ‘It’s time to buy. I’ve got the approval. I’ve got the house I want to buy. That’s the price I have to pay. The vendors are not under any stress to sell. I will pay that price.’ As a result of that, we’re starting to see a steady increase in auction clearance rates.”
For more of Mark’s analysis, tune in to the full Today Extra segment by clicking the video above.
