How to navigate the property market downturn - John McGrath

 The warmer months are traditionally the busiest time of the year for the real estate industry. But while Spring is now just a week away, the market correction has turned the usual seasonal rush on its head. In its place, we’re seeing cautious buyers who are unsure how to deal with the new cycle’s ups and downs.

My top piece of advice for both sellers and buyers is to stay calm and not panic. All the negative headlines are making it easy to do this. But any fear this propagates won’t help you sell, purchase, or rent out a property for your ideal price.

It’s true where currently experiencing a genuine correction. In most markets we operate in on the East Coast, we’ve seen a 10%-15% price decline within four months.

The key drivers of this downturn are the continued high cost of living, unrest in the Middle East and rising interest rates. The changes to the budget have wiped out almost all investor enquiry since the announcement, and this reduction in rental stock will place great pressure on an already hot rental market.

At the same time, the Reserve Bank of Australia (RBA) has left interest rates unchanged at 4.35% for two consecutive meetings. Following this month’s rates announcement, all of the Big 4 Banks predicted that rates have peaked, and will remain untouched until at least May 2027, when we can begin to expect some hikes.

In its latest consumer price index report, the Australian Bureau of Statistics noted inflation also dropped very slightly in June to 3.8%, down from 4% in May and from a 4.2% peak in April.

Recent high growth in our mid-sized capitals has given them an excellent buffer against value downturns as well.  In other good news for the current market, traditionally when markets correct like these, they come back by between 5% and 15%. So history would tell us we are close to the bottom.

Also, one of the key differences between this correction and others I’ve experienced is that underlying economic factors are quite stable, whereas previously we’ve had a far more fragile economy.  It doesn’t feel like the economy is dropping rapidly so I think this is more a crisis of confidence than it is an economic crisis.

I think it’s a terrific time for most buyers as they’re getting a 15% discount on what they would’ve bought six months ago for most listings. But if I was buying, I’d be looking at securing something before Christmas if the right opportunity presents itself.

For sellers buying and selling into the same market, your situation probably hasn’t changed at all. If you’re looking to sell but won’t be buying back into the market, you might want to consider holding off a little while the market sorts itself out.

For now, I would encourage buyers and sellers to stay calm. Look ahead to Christmas and next year for the stabilisation of prices and the beginning of a new cycle and with it, a strong recovery from the current downturn.