Why Now is the Time to Buy!

The 18th of May 2019 was the turning point for our market and this coincides with Macquarie Banks report of a ‘textbook’ correction. This date was Federal election day and all uncertainty associated with what was going to happen quickly disappeared. We have experienced consecutive RBA rate cuts in June and July, a lightening of restrictions on borrowing through APRA; there is anticipation of 2 further cuts between now and early next year to stimulate spending. What this means is if you are willing and able to buy property now is the ideal time, and for those that have been sitting on the fence and debating whether to sell or not, this is perfect for you also, clearance rates are back around 80%, so take advantage of the current scarcity, increasing buyer activity and maximise your sale result.

In the past few months post-election, we have seen housing policy, APRA changes and low-interest rates combine to bring some consistency back to the market. Over the next 1 – 2 years, these stimuli will see property values start to slowly increase. We will not see the 10% – 15% growth rates that we experienced in 2018, but we will see the shift back to the consistent growth rates of approximately 5%. Over the past month, we have had some strong indicators to suggest that this has started to occur. This does mean that values have increased but the activity that will lead to future growth has begun, with the strongest indicator being Auction clearance rates, which are back up to 75% – 80%, this time last year they were hovering around 50%.

My advice would be anyone looking to transact in property, from now until March will offer excellent opportunities. ABC news reports that the question, ‘will the RBA cut rates?’ is a no-brainer, and it is pretty well a certainty in the next couple of months. They are reporting that the market has priced in two full 0.25 percentage point reductions by May next year. The lower rates will create a temptation for borrowers to lend and spend more, however, APRA is worried about too much easy money flowing into housing which will undermine its stability, so the advice is to remain cautious and not get carried away.

Low-interest rates are not cause for celebration for everyone, those that have cash invested are attracting interest rates of as low as 0.5%. The simple way to describe the current situation is that we are simply not spending enough in retail and on consumer products. The RBA’s (Reserve Bank of Australia) main gain is to get unemployment to 4.5%, and at last report, it was sitting around 5.2%. Lower unemployment fuels income growth and spending, and the current trends suggest these targets will be met early 2020.

As quoted by the Macquarie bank ‘rental vacancy rates are an excellent high-frequency indicator of supply and demand in housing markets, because they are suggestive of the bargaining power of either renters or landlords at any point in time. The current vacancy rate for the Geelong region is 1.9%, which indicates a stable rental market; 1% or below highlights a landlord’s market and a surge in rental values, and 2.5%+ gives tenants more choice and negotiating power.

In short, the market is yet to experience the expected mini windfall from the promise of fatter tax returns, and the markets current lack of spending is influencing the cash rate. Dwelling values are expected to experience a positive shift in the next 4-5months at a rate of approx. 3%, with a more consistent 5% growth rate into 2020. A reduction in interest rates will allow for more money to be borrowed by those that can, however, this will result in negative benefits to those with cash savings. There are fewer homes on the market for sale, and this supply does not look like increasing significantly which will lead to stronger competition on those properties being offered for sale.

This all creates the perfect time for buyers, selling and investing. Buyers can purchase, knowing the values will increase; sellers can take advantage of competition and buyers ability to spend a little more; investors can have confidence in the fact that vacancy rates are low, and we are coming into the peak season which will drive demand.   

If you have any questions or would like to discuss further, please contact Nathan Ashton at Gartland
Property on 0418 566 708 or via email to nathan@gartland.com.au