It’s noticeably harder to qualify for a loan, meaning there are fewer buyers.
Foreign buyers have been scared off by substantial fiscal disincentives, meaning there are fewer buyers.
News headlines are forecasting turbulent times, so sentiment is weak meaning there are fewer buyers; and
Supply has increased a little, meaning there are more sellers.
This is all well and good, but what does it mean and how should you act?
Highs & Lows
The seemingly never-ending real estate ‘high-pressure system’ that was camped over much of Australia for many years has finally moved on and we are now feeling the effects of a new ‘low-pressure system’ that first hit WA, and has finally made it to the east coast. This new weather system has resulted in ‘cooler temperatures’ (unless you are in Hobart where the market is surely overcooked), with even a little patchy drizzle here and there. There’s been no rain though, and certainly no hail or thunder.
Not yet, that is.
The topic of conversation now seems to be whether the weather is a short-term blip, the new norm for the foreseeable future, or a pre-cursor to a Game Of Thrones style real estate ‘winter’ that will put the freeze on property investors.
As I like to say, I know my head may be bald, but it’s not a crystal ball – so I don’t know for certain what’s going to happen, but what I do know is that you need rain to make a rainbow.
Real Estate Rain
The long boom in Australian real estate was not normal. Real estate used to be a yield (i.e. income) investment, but structural changes to taxation and various buyer incentives that began in the early 2000s changed it so that real estate became a growth (i.e. capital appreciation) investment.
Eventually though, the conditions that facilitate growth naturally dissipate, and, unless new conditions arise to fuel a new growth cycle, the market will experience a period of stability or decline until conditions arrive to kick-start the next period of growth.
However, rather than pause for breath, the Aussie property market experienced the equivalent of an extended Indian summer after an unprecedented run of growth-stimulating events: CGT discount, FHOG, rising populations, a commodities boom, historic low interest rates, foreign buyer boom, lax lending standards, and easy profits from speculating.
Today we have rising interest rates, fewer foreign buyers, more rigorous lending standards, and fewer speculators. It’s understandable, even expected, that prices are softening and they should continue to do so until new conditions emerge.
The Usual Umbrella
Theoretically, when growth subsides, an investment’s yield (i.e. income over expenses) usually makes it affordable to hold until the next cycle begins. That is, the positive income acts as an umbrella to shield the investor somewhat from the impact of declining values.
Aussie real estate is now so over-valued that the after-debt yield is negative so, in the absence of growth, investors are losing money (i.e. expenses greater than income) for the right to lose money (i.e. property values falling). Add in a few interest rate increases, and the number of sellers will increase while the number of buyers decrease, and prices will fall further. The drizzle will become rain. With no income umbrella, a thorough financial soaking is a distinct possibility.
Which brings us to the important point of this article -people think that real estate rain is bad. It’s really not. It’s completely necessary to balance out the previous cycle, to reset expectations, and to set us up for the next period of property sunshine.
In fact, when the sun eventually comes out again, the easing rain tends to result in a rainbow – a profit opportunity from values resetting, with a possible pot of gold to be found (and maybe a leprechaun or two) at its base.
As mentioned, some people believe the present drizzly circumstances are a short interlude in a continuing property boom. That’s unrealistically optimistic. While others feel a few drops of rain is an omen to run for the Ark. That’s unrealistically pessimistic.
What is needed is a reassessment of your strategy to ensure it is suitable for the current climate, and to make appropriate adjustments so that you don’t get caught out in the rain. Meanwhile, also ready yourself to act so that when the real estate rainbow eventually appears you’ll be able to jump on it.
If I’ve learned anything in the past 20 years of professional investing, it’s that one person’s rain is another person’s rainbow.
What do you think is going to happen to Aussie property prices going forward? Be sure to contribute your thoughts by leaving a comment below.
Offering 6 bedrooms, 3.5 bathrooms, study, kitchen with massive double oven, overlooking a the meals area and family room. The separate lounge with an open fireplace to warm up those cold winter evenings and the substantial dining room flow out to a private inner courtyard with 2 spacious activity rooms suitable for work or play.
Positioned in the sought-after Parkwood area, this beautifully presented home is ideal for small families, first home buyers and investors.
Offering a easy care open design, the home comprises of four bedrooms, two bathrooms, beautiful spacious open kitchen with adjoining dining and living area and good sized laundry with cupboard.
Situated on a 546 sqm private rear block, there is plenty of room for entertaining and secured area for kids to play.
- Energy Saving solar system - Ducted Evaporative Air conditioning - 2 split air con units - Security Doors - Double garage with internal access - Close proximity to Riverton Leisureplex, Riverton Shopping Centre and nearby schools.
This vendor is prepared to meet the market to downsize and here is your chance to secure a property that has all the basic infrastructure completed for the comfort of your family & to be self sufficient. An opportunity like this is not to be ignored or missed.
JUST LISTED - WHISPER QUIET GLENELG GARDENS VILLA, APPLECROSS.
5/832 Canning Highway, Applecross
Here is an opportunity to own this unique villa offering the benefits of spacious living (89 sqm) plus an extraordinary alfresco area, - in the sought-after, leafy suburb of Applecross.
Total privacy with no traffic noise in the two bright bedrooms, large living and dining areas, and offering an amazing alfresco lifestyle with huge, idyllic ( approx. ) 140sqm easy-care garden including (approx.) 42sqm pergola for entertaining.
Glen Robin Farm was one of the original larger farms of the district of Kendenup producing sheep, cattle and pigs with orchards and cropping country. The farm has been divided over the years and now the original homestead remains on 21.7 ha [55 acres].
The farm is situated just east of Albany highway and has bitumen road frontage. 18km to Mt Barker which has schools, shops and medical facilities. Not far from vineyards, the Porongurups, the city of Albany and the beautiful southern coastline.
Come and visit this charming north-facing quality home on easy care 344sqm survey strata block, in quiet tree lined street. You are within walking distance to Garden City shopping centre and bus station, medical facilities, library and Shire offices. A main bus route is one street away.
This delightful home has 3 spacious bedrooms, 2 large enough for king size beds. The master has a large walk-in robe whilst the secondary rooms have built in robes.
Two delightful courtyards beckon- one offering a covered patio with built-in gas BBQ nook and water feature, the other surrounded by mature trees is perfect for sundowners on balmy evenings.
This stunning home is in a quiet cul de sac in an elevated position with City views. It has been lovingly renovated with class & style to answer every need of comfort that you have.
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The 3 bedrooms downstairs in a separate wing are a generous size and the guest bedroom has access to a well laid out semi en-suite complete with bath and large shower. This area provides good separation and has an important storage area that incorporates the under stair space so it is BIG. Upstairs is the parents retreat with a HUGE ensuite, city views and large study or nursery - if you were running a home business it is all set up to go.
One of Thornlie’s best family homes has hit the market for buyers in search of a spacious, stylish, residence with the most amazing Kitchen you could possibly imagine! 17 Wisteria Place Thornlie is a stunning 4 bedroom + study, 2-bathroom family oasis which promises a wealth of stunning highlights and a location which has everything you need so close by!
Enjoy the peace & quiet of this lovely 44.7 acre property in the quaint town of Kendenup 16.5 km from Mt. Barker.
Modern 3 bed 1 bath energy saving home with double glaze windows, solid timber floors and gracious casual living areas. On mains water with several rain water tanks strategically placed for their use. Double septic tanks
On those hot days or balmy summer evenings after a hot day, relax in the large spa on the back verandah to enjoy the peace and quiet of the location other than the birds calling.
Sweeping vistas and glorious sunsets across the rolling country side gives you a sense of space from neighbours in your little piece of heaven.
Located on just over half an acre is this modern hardiplank and iron 4 bed 2 bath home. Timber floors bring a warmth and easy care to the bright main living areas which includes informal dining for a large table to seat 8, family lounge heated by a lovely wood stove and plenty of space to have comfortable seating and book shelves. At the front of the house is a medium size theatre room or formal lounge.
The modern kitchen has gas stove and electric oven with an island bench/breakfast bar that has a double sink, dishwasher and spacious cupboards. The panty is a good size with shelving and alongside the cooking area is plenty of bench space not to mention the breakfast bar area.
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Located just out of Kendenup town centre and across Beverley road opposite the Kendenup Country Club & Golf Course.
This property provides the space for that the city no longer provides for you to just 'do' your thing.
POSITION, CONDITION and PERMISSION to purchase. The owner has put heart and soul into creating this beautiful home but is now moving on and this is your chance to secure your home in this safe tightly held suburb.
He who hesitates is lost. If this property is of interest to you then you will need to get registered to be able to participate in the final bidding. The vendor will be meeting the market and it will be sold....
A secure, immaculate, modern air conditioned 3 bedroom, 2 bathroom villa in a well run complex in quiet street.
Great location - It is within walking distance to East Victoria Park, Bentley Plaza, Public Transport & a short drive to work areas of CBD, Welshpool Industrial area or with arterial roads to most other areas.
Sleep longer & get home quicker. Short drive also to the Burswood Complex & Optus Stadium.
Contact the Jo Lindo on 0429 092 110 to discuss further details & view the property.
Q: What price can I get for my property if I sell with PWC Realty?
Selling a property for the best price in the market depends upon 3 P's:
1. Price - Where & how you price the property relevant to the market conditions & sales evidence 2. Promotion - How it is promoted ie marketed & with the right listing strategy 3. Presentation - in other words does it have a 'wow' factor.