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.

Read more in my Winter 2019 newsletter . . .