Whether it’s a desire to live out your own ‘Great Australian Dream’ or leaving the family home in favor of a lifestyle shift, like so many did in the aftermath of the COVID-19 outbreak, the real estate market has a history of reflecting our common emotions – our concerns, goals, and desires.
It’s not unusual that the Sydney real estate market is portraying a sense of absolute volatility about the long term, given household economic factors and the financial and social unpredictability that any Federal Election brings, as well as global issues like the pandemic, regional tensions, and the war in Ukraine.
There are reasons to be optimistic, not least because I believe it is critical to maintain faith in Australia’s largest industry and employment, the property sector. This market’s existing ‘pocket’ is a result of such domestic and international difficulties colliding at the same moment. We don’t know how long it will exist, but it will definitely peak and then go away, just like our feelings. After all, one of the very few certainties in life is that things will change.
So, what will be the catalyst for this shift? There are four important things that I feel will have an impact on where opportunities in our great sector will be in the coming 12 months.
1) Labor’s newly elected government:
Irrespective of how you voted in the last Federal Election, the incoming Albanese Government’s intention to address fundamental housing market challenges is encouraging. This includes the ‘Help to Buy’ program, which targets first-time home purchasers by reducing the cost of purchasing a home by up to 40% through a federal equity contribution.
The National Housing Supply and Affordability Council will assist the government in ensuring that it “takes a leadership part in enhancing supply of housing and striving to improve home ownership,” and the National Housing and Homelessness Plan will pinpoint policy changes “required to make it relatively easy for People in Australia to purchase a property, cheaper and quicker to rent, and build a house over the heads of more homeless Australian citizens.”
2) How crucial Interest rates are to success:
While Labor’s efforts will try to bring about real and long-overdue change, interest rates are likely to have a great impact on the market in the coming six to twelve months.
The fact that interest rates climbed during a Federal Election campaign for the first time since 2007 has no doubt added to the fears of first-home purchasers and younger Australians, and underlines the larger changes at play that previous generations haven’t seen.
The intensity and rate with which interest rates climb will be critical factors in the market’s ability to understand and plan for these developments. While we know that the 25-basis-point increase in May to 0.35 percent from 0.1 percent was just the beginning of a longer journey, gradual rate increases would help to relieve Australians into this new territory – even if the RBA believes it is appropriate to “start the process of normalizing monetary conditions.”
3) How Supply and Demand are interrelated:
Following the torrid pocket of price hikes, undersupply, and demand among all categories that characterized prior years across Sydney, the Sydney market is in the course of stabilizing itself.
The Fear of Missing Out factor of buyers has been replaced by a fresh sense of discernment, resulting in a more deliberate approach to purchasing. Properties that would have attracted a large number of bidders in the past are now attracting only a small number of purchasers who are aware of the possibility of price reductions if the property sits on the market for longer than expected.
This is evident in auction clearing rates, which are down from 71 percent around this period in the previous year to 59 percent in Sydney, according to Domain. Properties at the highest end of the market are also being scrutinized more extensively, with purchasers considering the home’s ability to support them financially, psychologically, and culturally.
4) Factors that trigger favourable living conditions:
If there’s one thing that demonstrates how much of a mirror the real estate sector is to our lives, it’s this. Homes that offer a compelling lifestyle will always sell and rent quickly. Places where you feel at ease not only within your comfort zone, but also within your community, are indisputably better equipped to withstand the storm than those that do not.