There has been much talk about these ‘unprecedented’ times. As a word, it is getting an unprecedented amount of coverage. So, we will just refer to the period of Autumn 2020 as ‘unusual’.
In April and May, life in the world of real estate (and everywhere else) was unusual. But you will be pleased to know that things are now settling down.
So, what did unusual look like? Well throughout the whole lockdown period we continued to receive enquiries for property. And we also continued to achieve sales throughout this period as well. Admittedly, these sales were for properties that were already on the market rather than new listings, but it is important to state that while Australia went into isolation, the property market did not. Typically, we were dealing with people that were serious about buying or selling, with speculators light on the ground during this time.
There was a four-week window where we couldn’t offer open houses. Once that concluded, we were pleasantly surprised at the numbers of people coming through. In fact, numbers were what we would normally see, outside of COVID-19.
We have all read the stories about a predicted downturn in the property market. Some have predicted as high as a 30 per cent drop. Others are leaning towards a more modest reduction. We do expect that there will be an adjustment, but it will be nothing like the worst-case scenarios being painted by more sensationalist media commentators.
And without the benefit of a crystal ball, can anyone really know? There are many post-isolation factors still to be played out. The market is directly affected by job security, so the timing of the conclusion of the job keeper allowance will likely have an impact. Our Treasurer has signaled that Australia is now in a recession, but the extent of the recession will not be apparent until data from the June quarter comes to light. And meanwhile, it appears that other world economies are in significantly worse shape – so maybe we are the lucky country after all?
But we need to be realistic about prices and acknowledge that a downturn is likely. Premium house prices can only be achieved in a market with strong demand and short supply. And today’s north coast property market is characterised by weakening demand and a moderate growth in supply. Which is a complete flip on what we experienced just a few short months ago at the beginning of 2020.
The key take home messages are that yes, things are moving more slowly than before, but if a property is priced correctly, it will sell. And if you are sitting on the sidelines waiting for a bargain, you might be waiting a while.
Demand for property remains relatively strong considering the overall environment, but it now comes with some strings attached, with purchasers keeping one eye on the horizon to see if any of the doomsday predictions are coming through. Meanwhile, supply has weakened with many potential sellers currently sitting on the fence and waiting to see which way the market will move. Right now, if you don’t have to sell then there is no incentive to sell. However, it’s inevitable that the market will adjust, and supply will catch up as time goes on. Time does not wait! There are always people who need to buy and sell regardless of outside factors: people need to sell as their work location changes; retirees downsize; families upsize as their numbers grow; and there’s no shortage of young couples moving into the market.
People move to our region for a reason. It is rarely for a local job. Often, they are downsizers or sea changers looking primarily for lifestyle. We also predict a second wave of big city migration to our region, as city dwellers who have been working from home make the connection that a work from home arrangement is a viable way to earn a crust, and that relocating to a cheaper ‘lifestyle’ region with access to broadband, good schools and airports might just make for a better life. In tandem with this, people may also make the connection that living in low density housing means more personal space and better access to the great outdoors should we experience a pandemic second wave.
Within our region, demand remains steady for properties in Lennox Village and East Ballina, followed by Ballina Island. We are still seeing sales above $1M, with demand for both high and low ends of the market relatively equal. The median price in Lennox is now over $1M. Houses are more in demand than units. Properties in the $500,000 – $800,000 price bracket are selling relatively well, as are properties in $1M – $1.2M bracket.
If you are thinking of selling but have been sitting on the fence; now may be a better time than later to jump in as you will be ahead of the inevitable catch up period.
Aside from the usual holiday speculators, the festive season is not traditionally a busy time in real estate; but this year has proven to be an exception. There was genuine high interest and activity throughout December and January, with many properties sold.
During February, this equation changed. While the high numbers of buyers remained, the supply of properties to buy reduced. In fact, what we saw was a growth in the number of people entering the buyers pool, with a corresponding decrease of supply.
What’s driving this growth in demand for properties?
There are a few reasons. Firstly, historically low interest rates are providing a unique opportunity for more people than ever to gain a toehold into the property market. In tandem with this, there is a steady migration into the property investment market as a consequence of the low interest rates. Growth in buyer interest is also being spurred on by the banks becoming marginally more flexible in their lending criteria as the dust settles post banking royal commission, meaning that the process of securing a loan has become a little easier.
Similarly, the decline in supply can be attributed to a couple of factors. One is that, generally speaking, people are not under financial duress and do not have to sell. Another telling factor is the subset of people who want to sell, but with limited current options to purchase, are choosing to wait out this current scenario until they have more choice. And this later thinking process creates a catch22 situation, where because there is less to buy, people don’t sell, and a cycle is created.
This type of market is characterised by quick sales, competitive offers and great prices. Essentially people are eagerly contesting the small pool, and this has the effect of pushing prices up.
In a hot market like this, sales might not just come from an agent’s data base. To achieve the best outcome for the vendor, agents need to be across all aspects of their sales arsenal including digital marketing to provide optimum exposure from multiple buyer pools.
What’s been really positive is that in the last few months, almost all properties destined for auction have either sold prior or on the day. Offers range from the target price to above target, and importantly – sellers are very satisfied with the results.
Another consequence of a reduced supply and high demand market is that buyers are less picky and will look at everything. This scarcity of stock means one thing: It really is a great time to sell!
Our current market can be described in one word – ‘buoyant’. We are pleased to report that there is plenty of action and activity, with more overall interest than was reported just three months ago.
Without question, it is a sellers’ market. Some buyers are a little frustrated with the restricted supply, but new listings always generate plenty of interest. With stock a little tight, we are seeing a marginal creep upwards in price as demand outstrips supply.
So, what’s selling? The answer is pretty much everything. As always, well presented homes with nothing more to do are getting snapped up, but there is also interest in the fixer-upper.
Time on the market has reduced from the last newsletter. The time from first listing to acceptance of offer is around three weeks on average, and sometimes less. Typically, the balance of this time gets absorbed in loan paperwork and legalities. And some sellers are opting for a delayed settlement to give themselves time to secure a new property in the same market.
We have previously reported about buyers having difficulty securing finance in the wake of the banking royal commission, and the associated waiting times and paperwork required. In good news for buyers, this financial gridlock situation is now easing a little, and buyers are capitalising.
October brought in another interest rate cut, putting us in uncharted territory with a current interest rate of 0.75 per cent. This rate is unprecedented and with a greater ability to pay funds, it stimulates action and gives buyers access to properties which in other markets they would not be able to afford.
While the interest rate changes are helping to resolve market uncertainty, we are now seeing a situation where people wish to sell and then buy in the same market, but they don’t want to sell until they buy. Being tentative about not selling your own home until you have secured a new property is entirely reasonable, but it does create a market bottle neck where everything is on hold until your offer on your dream new home is accepted, or until you find the perfect replacement property. It is great when we see this chain reaction resolve, but in the interim it does create tension for everyone caught in the funnel. Twelve months ago when prices were lower, people were holding out on selling. But now that prices are increasing, people are keen to sell but are then holding out until they find something to buy. It is a conundrum.
While we’re not quite popping the champagne corks, we are observing a noticeable change in the real estate market since we last communicated with you. Although far from peaking, the local market has definitely adopted a more positive orbit, and things are building. There are more listings and more opportunities to buy and to sell.
This time last year the market was chaotic. Now, we have a slow and steady situation with genuine buyers and good opportunities. Our primary piece of advice for anyone thinking of buying is to get in now and take advantage of the record low interest rates and the slower market.
The market is presently being helped by the record-breaking low interest rates, which are currently doing an extended limbo dance (how low can you go?) at just one per cent; coupled with a marginal reduction in property prices with both factors attracting buyers back into the market.
Investors have been quick to capitalise on this aspect, knowing that investing in bricks and mortar is a far more attractive and less dusty option than leaving their hard earned cash in the bank.
The big question is … have we reached the bottom of the market? It’s always so hard to speculate on this question as it’s nearly impossible to get it right. But signs are there that perhaps we have reached the optimum buying time. We’re in a perfect storm of low interest rates and value prices, and changes to the borrowing criteria by APRA (see the APRA story in the adjacent column for more details) are providing more flexibility.
Advice that does resonate is for sellers not to expect a dramatic shift upwards in price. What’s more likely is a gradual shift upwards over time.
We are also seeing more auctions at present as auctions are a great mechanism to test buyer expectations and gauge where their level of interest lies. Auctions are also pretty bang on trend during the Spring real estate period as more properties come on the market. We are seeing some great results with some individual properties still selling beyond expectation.
So, what’s selling?
It may only be a temporary trend, but we are currently seeing a lot of local people participating in the real estate market. Typically, these buyers are looking for a fair priced property that they can add value to. This is in direct contrast to last year when people, often relocating ex-Sydneysiders, were primarily looking for completely finished properties in prime locations with nothing left to do. Locals are stepping up and are ready to move on the right priced property – particularly in the Ballina market.
We’re also seeing a high proportion of first home buyers currently looking, as well as investors searching for the right property.
Interest in land continues, with many people eager to build a home that is perfectly tailored to their family and their needs. In turn, building costs are trending upwards, and we can speculate that a shortage in local trades has contributed as many builders are booked up well into next year. Project homes are significantly cheaper, but the downside is less choice and opportunity to tailor the build to a particular site.
Well, it’s a very curious market that we are finding ourselves in, with a bunch of outside influences helping to shape it.
Overall, the last three months have been relatively quiet; but careful analysis shows that it was never going to be anything but a modest period. April was a super-maxi public holiday extravaganza, with many people combining the Easter and Anzac Day holidays to capitalise on a 10-day straight break. Throw into the mix two weeks of school holidays, and you have an impacted real estate situation.
Another key influence in the market, from late March onwards, was the federal election. During an election period people traditionally take a ‘wait and see’ approach when deciding to either buy or sell, and this effect was compounded during this election campaign, with issues such as proposed reform of property tax concessions, capital gains tax and negative gearing all major talking points. The end result is that people stepped back from property during this period. And this effect was further influenced by the earlier NSW State election, which also had people sitting on the fence.
There’s another curious factor at play here. People are often more conservative around tax time as they weigh up their financial position, and this can also flow into how they approach a sale or purchase, with many choosing to hold off until the new financial year before jumping into a new real estate venture.
Within the current market, we are still seeing lengthy delays in concluding sales. Some properties create an impression of appearing available for a long time, but in actual fact they’ve been in the process of being sold the whole time, just awaiting finance approval.
Lending criteria continues to be tight for borrowers and financial approvals can take several weeks. We encourage buyers not to be complacent about this, as it can result in missed opportunities on dream homes. It may have been a quick approval process for you last time, but everything has changed. Even refinancing can be slow and tedious. There’s significant paperwork to be completed and taking out a new loan with your current provider won’t necessarily lead to a shortcut.
You could take a dim view of the last three months, but in fact we’re excited as we feel confident that we are entering a catch-up phase now that the dust has settled on the election and people have regained focus after all that holidaying. And this sentiment is largely being echoed by real estate establishments around the nation as the recent sluggish market was universally experienced. Our prediction for the upcoming period is continuing stability and improved conditions. And we have plenty of compelling reasons to substantiate this claim.
The 25 basis points interest rate cut announced on 4 June was significant. Not only was this the first time that interest rates have dropped in nearly three years; at 1.25 per cent it’s the lowest rate ever seen. This is extremely positive for borrowers and should help to free up the market.
And we have more good news for borrowers. In addition to the June interest rate cut, there are proposed changes to borrowing criteria. Currently, the Australian Prudential Regulatory Authority (APRA) uses a mandatory seven per cent interest figure when assessing mortgage applications, with an understanding that if interest rates do later go up, the borrower still has the ability to meet their loan repayment obligations. This seven per cent ‘stress test’ looks likely to be superseded with a new rate which is 2.5 per cent above the bank loan. For example, if you are looking at a loan which is actually 3.5 per cent, then APRA will assess your ability to repay at 6 per cent. This change is expected to come into effect soon, and we anticipate it will have the dual effect of loosening up the market and making borrowing more affordable. What won’t change is the amount of paperwork or the long approval time frames, so continue to plan ahead and expect delays.
And there’s even more good news, this time from the tax office, with promised tax cuts for low to medium income earners looking likely to be adopted. People with taxable incomes between $48,000 and $90,000 can expect to experience a tax offset of up to $1,080. This is up from a former offset figure of $530, making conditions even more favourable for borrowers.
For sellers, action in the current market is strongly dictated by accuracy in pricing. Pricing must be spot on to gain interest, and the first weeks on the market remain the best window for attracting genuine buyers and achieving a satisfactory price.
Like a hot air balloon, markets need heat to rise. When the heat comes off, the balloon – and the market – starts to come down.
Where is the balloon on the north coast right now? It’s in a ‘normal’ position – and like the bowl of porridge for goldilocks – it’s no longer hot but it’s not cool either. Some would say that it is ‘just right’.
And while this current normal period took buyers and sellers a little by surprise a few months ago; the transition period from hot to normal is now over and people are more aware of where the market is at and what properties are worth. Our buyers are educated and have no appetite for overinflated prices; but get the price right and the sale will follow.
With summer now wrapped up, activity is starting to pick up. We have more sellers making enquiries than in the last six months, and things have settled into a new routine. People who were previously sitting on the fence are now feeling more comfortable about current market stability and are jumping into the fray.
The current market certainly favours the buyer. During open homes, we are seeing good attendance at well presented, desirable properties. And less desirable properties – not so much.
In its current state, the market provides agents like us with a golden opportunity to really help navigate sellers through the sales process. With properties taking a little longer to sell, great market knowledge and salesmanship is more important than ever.
If, like Humpty Dumpty, the sale looks like falling over, we are there to help put it all back together. We will work to keep the buyer interested and to achieve a sale that is pleasing to all parties. We can put the fires out that you may not see coming and draw on our considerable experience to help you through unforeseen circumstances. We provide advice with aspects such as a less than glowing building inspection with adverse building reports, finance obstacles and contract hiccups etc. And as always, we are acting on your behalf helping your property achieve its full sale potential.
Anecdotally, builders are starting to report a slowdown in building enquiries. Given that it has been frenzied for quite a while, this is a thumbs up for people looking to build, as it means less waiting to get started.
TIME ON THE MARKET
We are seeing an average time on the market of three to four weeks from first listing until the offer of acceptance. However, this is when the real fun starts, and it could be another three weeks or more before contracts are exchanged.
Why the wait? The holdup lies with the banks who have adopted more of a cautionary approach in the wake of the Banking Royal Commission.
The take home message for buyers is have your paperwork ready. Meet with the banks prior to searching for a home and obtain pre-approval at the least. Even in situations where a buyer is fully prepared and approved, we are still seeing lengthy wait times.
Buyers need to be prepared to jump through some hoops. Even if you were pre-approved six months ago and your circumstances have not changed, expect to have to start the whole approval process again. And people are finding they can’t borrow as much as they could twelve months ago.
Naturally, this practice is contributing to a slowdown in the market. It also creates a false impression of local real estate, with some homes appearing to be on the market for two months or more; when in fact the property has been in the process of being sold the whole time.
We’ve all seen the recent headlines about where the real estate market is heading in Sydney, and some people are quick to draw similar comparisons here. And while it is true that the north coast market has slowed a little, there remains movement and opportunity.
Real estate markets are a curiosity, and the pivot point between demand highs and lows is always quick when it happens. Just six short months ago we had a situation of great demand and very low supply. Then in June 2018, everything changed.
Right now, we are observing that prices have fallen marginally from earlier in the year, and this is creating opportunities for people to enter the market and secure a home. And while it is true that there are less properties on the market than at the beginning of Spring, this is also typical of this time of year.
Properties are taking a little longer to sell at present, with an average time on the market of 4-6 weeks, and the sense of urgency that we encountered at the beginning of the year has dropped away. Fallout from the Banking Royal Commission has seen finance approval taking longer, where banks have really tightened up the lending process. Loan paperwork is now much more onerous than it used to be, with elements such as a HEX debt and monthly Netflix accounts now forming a part of the big picture. And while we certainly applaud the creation of a system that is more honest and transparent, when banks tighten up lending criteria they hand out less loans, and this then has a direct effect on property demand.
When the hype drops out of a market, many would-be sellers take a sabbatical and delay their planned sale while they wait for the market to pick up again. And likewise, many buyers take a ‘wait and see’ approach and delay their entry to the market while they speculate on where things are going.
One of the important things to remember with real estate is that while the market continues to ebb and flow, people will always need to buy or sell property, so regardless of how strong or steady the market is, there is always some level of activity.
And we are fortunate to live in a growing area where there is always demand, particularly for well finished, well positioned quality homes ready to move in to.
In times gone by, people were not so concerned about the market in relation to buying and selling; they just bought and lived in a house. Nowadays, it’s a different story. People are more educated about the state of the market, and more calculated about when to buy and sell. They see the family home as vehicles for wealth creation and some people even have exit strategies in place when they purchase.
In this current transitional market, we are seeing some sellers with inflated price expectations based on sales from the highs in the market earlier in the year. Sellers do need to understand that in the delicate dance that takes place between buyers and sellers to achieve a sale, it is the buyers, parting with their hard-earned dollars, who drive the market. Sellers need to be able to respond to this.
The spate of major road works taking place in the region are having a strong influence on the local rental market. And parallel with this, we are continuing to see more and more people choosing to live in this region and either commute to their workplaces in Brisbane or the Gold Coast; or they might come to more of a FIFO type arrangement where they live and work in Sydney during the week, and fly home to the north coast for the weekend.
The reasons for the strong attraction of buyers to our region remain vast and varied but it is festivals such as Blues Fest, Falls and Splendour that have really helped to put this region on the national map, and enhance its desirability for visitors as an alternate destination to put down roots and grow a life and a livelihood.
The wattles have come and gone, and recent welcome rains have filled the dams and water tanks and freshened up the landscape. We’re now witnessing the gradual return of the early morning sun; there’s a gentle thaw in the evenings and our friends the whales are giving us a wave as they cruise south. The slide into the balmy months has begun. READ MORE . . .
Without question it’s the best time of year. Who doesn’t love cracking a shiraz on a cool night; taking in the majesty of the night-time sky while cozying up around the fire; the fresh, misty mornings; cool season beach walks; and hearty wholesome cooking best consumed while wearing your best elastic waisted pants. READ MORE . . .
The current market is great for sellers! At the risk of sounding repetitive – the local real estate appears stuck in a holding pattern that has persisted long past usual trend durations. And that market situation remains HIGH DEMAND and LOW SUPPLY. This trend is being felt across the whole region, with the only variation from late 2017 being a marginal lowering in demand conditions . . .READ MORE