Property analysts are reversing their dire outlook on the future state of the industry and seeing an increase or stabilisation in property values rather than the decline previously forecast. According to The Australian Financial Review, Westpac had previously predicted an 8 percent decline in Sydney property values but is now confident of a one percent increase. The nationwide forecast is that property values will stabilise rather than decline the previously predicted eight percent.
The bank has forecast that by 2024 there will be a nationwide increase in property values of up to five percent. Further interest rate hikes are likely to slow this increase, but the general outlook from economists is that the market has stabilised, and it will take a run of hikes to change this.
The reason behind the recovery is increased immigration, low stock levels of housing and increased new build costs due to construction labour shortages and rising building material costs which have surged by 25 percent in the past two years. There’s been a rebound in auction clearance rates and a slower pace of decline in housing finance approvals. Rising property values in the face of increased interest rate hikes has never been seen before.
“Prices have risen, ahead of rate cuts,” said Shane Oliver, AMP Capital chief economist. “We haven’t seen this occur in the past. All the housing recoveries from those previous slumps were preceded by lower interest rates, so this is highly unusual.”
There have been ten straight interest rate increases from the Reserve Bank of Australia (RBA), with rates rising a total of 3.5 percent. The expected peak to trough changes in house prices never reached the expected lows of 15 to 30 percent, instead levelling out at nine percent according to Corelogic, and four percent according to PropTrack. With inflation now appearing to be on the decline, and the RBA’s April pause in rate rises, there’s enough buoyancy left in the market that increases in values are being seen.
This is good news for those looking to sell. There is a strong chance that we are moving into the next phase of the property cycle. With unemployment at a 50-year low and rising wage rates, there is a new stability and confidence in the market despite a looming fixed rate mortgage cliff. With interest rates having been so low for so long, many mortgagees have been paying overs and are in a stable position to weather the storm.
When it comes to rental properties there is a dire shortage of stock and an increasing demand that will keep rental prices skyrocketing for some time to come. With rental vacancy rates below one percent, this could attract more investment buyers to the market, further maintaining increases to property values.
If you’ve been waiting for property values to stabilise or increase before selling, or if you’re looking to buy, perhaps as an investment, now may well be a good time to contact one of our expert sales team to take advantage of the next stage of the property cycle as it slowly heats up.