John McGrath – The opportunities in today’s market
As we begin the first week of the Autumn auction season, I see many opportunities in today’s market. In fact, it reminds me a lot of the period immediately after the GFC.
Most people had a very sombre outlook on the world economy back then. But I was advising clients to invest spare cash into the property market via a new home or investment as soon as they could.
And those that did were rewarded quickly.
The GFC rebound took 12 months instead of 24, and quality assets went up about 15% and much, much more since then.
Today’s market has a lot of similarities of that time. Many people feel fatigued and uncertain. This is understandable considering our recent experience with COVID-19, rapid interest rate rises, and a drop in asset values. But this is exactly the time that smart money jumps in.
Even though it sounds scary, I recommend buying quality assets, then shutting your eyes and just trusting that buying when everyone else is reluctant is the smartest move you can make.
My view is we are either at or approaching the bottom of the cycle. The next stage will be consolidation (plateauing prices) followed by further upward growth in asset values in 2024.
Traditionally real estate cycle corrections of the type we are in right now have lasted around 18 months on average, and prices from peak to trough have come back by around 8% to 10%.
We are now approaching the 18-month mark (around Easter) and we are well above the average price reduction for a cycle. So, we should be in the final stages.
Premium property will continue to attract overweight demand and prices for the best of the best may escalate earlier than the main market.
The Australian dollar has fallen around 6% against the US dollar, which will make it more attractive for overseas buyers to invest in Australian real estate in the early part of this year.
The Reserve Bank will likely continue to increase rates until the inflation rate is trending back toward its targeted 2% to 3% range. My estimate is we will possibly have two more rate hikes ahead of us before it levels out.
We will have economic challenges for at least the next 12 months, in my opinion. But there is light at the end of the tunnel. For example, immigration has restarted in earnest, which will benefit the economy and the housing market greatly.
So, to summarise…
The opportunity for buyers
Secure your new home or investment property over the next six months, while the market takes a breather and before interest rates settle and prices start to move again.
The opportunity for sellers
You can enter the market with greater confidence, knowing that new market levels have been established and a good quality marketing campaign and sales effort should deliver a positive result.
A lack of homes for sale in many areas means competition is solid, and we’re seeing good numbers at open homes. Many buyers have returned from their holidays with renewed vigour.