It’s hard to believe that 12 months ago, the biggest supply and demand headlines were about toilet paper. Fast forward to March – April 2021 and it’s clear that the post pandemic property floodgates are wide open. According to Corelogic, housing values rose 3 per cent across Australia compared to 2020 figures, with regional housing showing the strongest growth at 6.9 per cent.
Anyone on the ground can attest to the fact the market has moved far more than that, with premium areas and coastal regions jumping as much as 20-25 per cent since January. This three month period has been one of the steepest increases on record.
As I’ve mentioned previously, there are some fundamental drivers fuelling this activity, none of which appear to be going away any time soon.
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What’s fuelling the post pandemic property boom?
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But as we all know, what goes up, must come down. Or does it? As the growth trajectory slows, what happens next?
Based on our observations and research, we expect the market growth rate to stabilise for a period before growing again once the new values in certain areas become the norm.
In other words, don’t sit back and expect the market to roll from extreme growth into market decline; it’s not going to happen.
Here are some key trends on the East coast we continue to see.
Brisbane: Getting comfortable with auctions
Historically, auctions haven’t performed well outside the premium end of the market. Buyers prefer and gravitate to private sale listings and like to make offers with conditions. This isn’t the case now. Buyers are adapting to a more rapid fire and aggressive market place.
We have always felt that lack of auctions were a type of arrested growth in property, but with the huge open home numbers (over 40 groups through and 14 offers on this place which sold $100k over our expectations) we can see this level of demand continuing for some time.
Melbourne: Underquoting capital
Underquoting has eased recently owing to an increase in comparable sales. Last year, it was easy for agents to pick some COVID anomalies or fabricate a story about why nothing is directly comparable. That’s not the case now with plenty of sold sales volumes throughout February, March and April.
Having said that, we are still seeing situations like 11 Rose Street Brunswick, listed for $1,050,000 – $1,150,000 then selling for $1,621,000! Are we seeing 50 per cent growth?
No.
This is what buyers detest and a perfect example of a complete oversight or a clear sales tactic to ‘get volume in the door’ to make the $1.5m range buyers nervous about their 50 competitors, when in reality, there are only three others with the same budget.
Sydney: The fastest paced market
When the Sydney market kicks, it makes Melbourne look like a country town. Sydney wealth is stratospheric and competition is fierce. Lack of buyer resources like a ‘statement of information’ or a listed priced makes it tough to price property and navigate smaller suburbs which have many nuances that affect values.
Plus, it’s not easy to avoid these challenges and the off-market activity is high. You can spend a whole day looking at two sites only to discover they sold before you even got home.
Deals are getting done before auction and negotiation strategy is absolutely paramount. Holding back and waiting for auction on a property you love is fraught with risk.
Property booms and busts are common and unpredictable. It’s important to invest only when you are able, and get advice from independent sources. Time in the market is more important than timing the market.
What has been encouraging is the range of (government funded) interventions we’ve seen over the years specifically designed to keep the property market from crashing. Don’t forget, a headline is not the best source of information to inform your property investment strategy. The trick is knowing the right type of property in the best possible location.
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