Spring may bring light to this market correction - John McGrath

Another Spring season has begun and for the first time in many years, this traditionally busy period is undergoing a market correction.

I’ve experienced eight property market downturns in my career, but the current downturn’s sharp drop in consumer sentiment and confidence has surprised even me with its swiftness.

What is quite certain is that this Spring will not be a typical selling season but rather, could allow us to see the light at the end of the tunnel.

I think we still have 6-12 months of headwinds but in many ways, I believe we’ve seen at least half of the market correction already over the last six months.  Very few market corrections go for longer than a year. I also think that in most markets, prices have bottomed out pricewise and I suspect we will see a stabilisation in the coming months.

This brings me to an important point: the swift turn around in lenders’ rate predictions in the past month.  Following the Reserve Bank of Australia’s (RBA) third consecutive meeting of untouched interest rates on August 11, all of the Big 4 Banks were predicting rates had peaked at 4.35% and would not increase until May 2027 at the earliest.

Yet inflation data in late August showed trimmed mean inflation figures were unchanged at 3.6% - far beyond the RBA’s target of 2%-3%. These results, combined with stronger than expected economic data released in early September, have seen the Big 4 Banks now forecasting a rate rise either this month or November.

There are other economic factors shaping market conditions right now too, but I believe positive movement in some of these areas will be the catalyst for initial stabilisation and then growth.

It was encouraging to see that we are not experiencing high unemployment figures, which often accompany a market correction and can be a driver of these downturns. Instead, Australian Bureau of Statistics data released in late August showed unemployment is at an almost record low. 

At this stage, we have also not seen many distressed sales under pressure, as lenders work closely with their customers to find a path forward.

Individual locations across the country are likely to fare differently this Spring. I don't see many losers although Perth has been running hard for a long time and is due for a breather.

But Melbourne is the market likely to enjoy the best growth over the next 12 months as it is well undervalued historically and provides the best value for money on the East Coast. Sydney is traditionally the first market to correct and the first market to recover so 2027 should be a good market for Sydneysiders. And South-East Queensland, whilst there will be fluctuations, should see good growth right through to the Olympics.

While I don’t have a crystal ball, I believe this Spring will once again be a key period of opportunity for buyers and sellers. This season will also provide the market with one of the strongest indications so far of what further corrections, or stabilisations, will occur in Summer and the New Year.