The market is flooded with negative sentiment and sweeping statements on drastic price drops across the country.
According to Suburbanite Principal, valuer and market commentator, Anna Porter, thinking these sweeping statements apply to the whole market is simply never correct.
“We see different cities and different locations with different asset classes perform differently at different times,” shares Porter
“What we often see when the market does cool is it may wipe out the past 12 months of growth but when you look at the correlation, if Sydney had 20 per cent growth in the last 12 months, it’s only that 20 per cent that could potentially be wiped out,”
“But in context, when you hear 20 per cent it sounds like a lot, but it is only the last 12 months and it’s more modest in areas that haven’t had the strongest growth,”
“So, Melbourne and other cities might only see 10 per cent reductions and that’s a fairly normal correction to see.”
Anna Porter glances at the current state of the property market and warns of a tale of two cities – she is seeing Sydney come off.
“Auction clearance rates are dropping, increasingly more properties are selling outside of the auction formats and properties are taking longer to sell. There is no doubt buyers are more price sensitive and there’s not as many groups going through residential property or as many offers being made as there was 3 months ago,” shares Porter.
“There’s also a turning of the tide in Melbourne but all the other capitals are actually still powering ahead with huge groups inspecting, lots of offers being received and properties selling quickly,”
“It’s the affordability factor – the two powerhouse capitals are simply not affordable.”
According to Porter, Brisbane, Adelaide, Perth and the other capitals have the affordability factor and $600,000 to $800,000 still goes a long way to get a nice free-standing house.
“If you’ve got a million in Brisbane or Adelaide, you’re going to get something pretty special and that’s really attractive to a lot of families from Sydney and Melbourne who are relocating or even buying a holiday home and sharing their time which is driving the other markets,” she says.
“As for the unit market, CBD apartments lost a lot of value during the pandemic and there still isn’t the migration levels to see these values come back in strength but there’s always a few other things that play into it like oversupply in some areas around capital cities which we know was happening well before the pandemic.”
Porter reveals it’s not the strongest sector, but the unit market is not doing as poorly as it was nor there any major retractions occurring.
“It depends on location too,” she shares.
“If we look at a waterfront unit in a harbourside location this type of unit is absolutely doing well but when you’re getting into more the student style accommodation styles, we aren’t seeing them thrive again or yet.”
There is also a lot of negative sentiment on interest rates, but Porter highlights interest rates alone don’t impact the way the value of the market moves.
Porter reflects on times where interest rates were high, and markets have still gone up and when interest rates were low and some markets didn’t see growth in values.
“Interest rates is one mechanism of affordability and what plays into the bigger story is things like expendable cash, wages, wage growth, diversification of employment in different locations coupled with mortgage stress,” she shares.
“So, if the area is more affordable, the mortgages are at a lower rate and there is good job creation with high income potential, interest rate movements may not have a big impact,”
“Particularly in the smaller capitals as opposed to some areas in Sydney and Melbourne where people are carrying around million-dollar mortgages, wages haven’t grown, and we add a bit of inflation – the leaver starts to get pulled.”
According to Anna Porter, there will be markets that will suffer but we can’t say it will be every market because that is not what has been observed over the decades.
She shares that a long-term view on property needs to be taken.
“What’s really important is that you assess your own affordability and do some budgeting on what you can and can’t afford,” she suggests.
“If you take a long term view the property market will correct during that time, it typically does,”
“But you have to be able to hold through it and that’s an affordability thing that every household has to make their own assessment on.”