Real estate markets have been mired in uncertainty recently, as buyers and sellers wait to see how the inflation and RBA rate hike situations play out.
But even though there is hesitation and confusion for many, values have been slowly creeping up to point where most Aussie markets have recovered from recent correction periods and are now heading into a new growth cycle.
So what’s in store this year for the key players of the property world?
Latest on inflation
The most recent inflation numbers have revealed spending has cooled faster than expected.
This has convinced most commentators that the RBA will certainly leave rates on hold at their February meeting; that rates have now peaked; and that we can start looking at when we may even see a cut or two.
Some had tentatively forecast a cut could happen in the last quarter of 2024. Based on the latest numbers, some have brought their prediction forward to the third quarter.
Each time the rates have remained on hold, there has been a vibe of more stability to the market. A rate cut would likely see a bounce of confidence and the potential for elevated growth. Multiple rate cuts over coming years would boost values.
It’s been a rough couple of years for buyers. There have been next to no listings to choose from and prices have stayed stubbornly high. What has fallen, however, has been borrowing power. So, while a buyer may have been looking for property in a certain area 2 years ago, they will have seen their borrowing power reduced by about 30% and may now find themselves priced out of their first choice locations.
There may be some hope ahead, with an increase in listings expected in coming months, as the effect of the rate rises so far on people’s ability to make mortgage repayments finally washes through to the market. This could see windows of slight correction in some areas, though the current build-up of demand is likely to be able to absorb more available property.
At any rate, buyers should ideally get their finance pre-approved and be ready to strike when they get an opportunity.
Sellers have been in the box seat in a number of markets recently. First, when rates were historically low, buyer numbers surged and big competition meant big prices for a lot of sellers.
After rates rose, a lot of sellers shelved their plans and decided to hang onto their homes until there was some certainty about what the economy was doing. This meant there was still competition for those who did sell and they were still able to achieve good prices if they ticked boxes for their local buyer markets.
The rest of this year should see sellers remain confident, especially with the prediction that rates may soon come down again. However, they will need to tread more carefully than before. Anyone planning to sell this year should ensure they are realistic about their property’s value, they are on top of local market trends and engage agents who have high quality marketing strategies.
Landlords and tenants
If you read the hysterical media stories of late, you’d think all landlords were mega rich and on easy street.
Rents have soared, vacancy rates are tight and there has been no trouble attracting good tenants paying a premium on rent.
But landlords were also subject to interest rate rises and investors usually pay higher interest than owner occupiers already. So while returns increased, so did repayment obligations and the cost of everything else that goes with property, thanks to inflation.
Many landlords who had borrowed for their investment properties were forced to sell and quite a few still may have to in the year ahead. This may represent an opportunity to grab a bargain for landlords who are financially stable.
Rents are predicted to continue to rise in 2024, which will mean even greater returns for those able to hang onto their investment properties.
Of course, tenants will experience the flipside of this. More Aussies are finding it increasingly hard to find a place to rent and are experiencing a lack of bargaining power with landlords.
It looks like another tough year for most, but understanding their rights and responsibilities, making sure applications are correctly completed and being as flexible as possible will mean some tenants do better than others in 2024.