Hi,
Domain’s preliminary clearance rate remained stable at 59% across 742 reported auctions, with 437 properties sold at auction, 116 withdrawn and 189 passed in. By comparison, the clearance rate for the same weekend last year was 68%. The REIV also reported an additional 497 private sales.
There is no doubt the Australian property market has faced a number of headwinds this year. First came an interest rate rise in February due to inflation remaining above the RBA’s target range. Then, at the end of February, Israel and the United States launched strikes targeting Iranian nuclear facilities, military infrastructure and senior leadership. This further contributed to inflationary pressures, resulting in two additional interest rate rises in March and May. The Federal Government’s Budget then introduced significant proposed changes to negative gearing and capital gains tax, creating further uncertainty across the property market.
All these headwinds have created considerable uncertainty, and buyers remain cautious. Many have decided to “sit on the sidelines” until confidence returns to the market. A number of buyers I have spoken with are now planning to recommence their property search in Spring.
This creates what I believe could be a very good winter buying market. We are already seeing an increase in off-market transactions, and clearance rates are likely to remain in the 50% range, which generally means fewer bidders competing across the board.
Savvy investors rarely wait for the market to rise before making their move. Both owner-occupiers and investors may therefore have a window of opportunity over winter to secure properties that may have been out of reach only a few months ago.
It has also been widely predicted that interest rates may remain on hold next month due to the unexpected rise in unemployment. If recent commentary from Donald Trump proves accurate — although that remains to be seen — a deal with Iran could be imminent and the Strait of Hormuz may reopen, which would help ease inflationary pressures and reduce the likelihood of further interest rate rises. Consumer confidence should also improve once the conflict subsides.
Over the next four weeks, the Federal Government will be working to legislate its proposed tax reforms. While it remains unclear exactly what changes will ultimately be implemented, by the start of July there should at least be greater clarity, allowing buyers and investors to begin adjusting to the new landscape.
Overall, by the end of winter, we should hopefully be on the other side of many of these headwinds, which in turn could help restore confidence to the property market. In my opinion, this may provide residential property buyers with a valuable window of opportunity throughout the winter period.
Have a great week.
Kim Easterbrook – Managing Director
