National dwelling values continued to decline throughout October.
The result is further proof of the property price correction the Australian market is currently experiencing. While these national results come as no surprise, we are still seeing markets within markets in Australia, with some capitals seeing an increase in prices in the past 12 months.
Despite price increases in Adelaide, Canberra and Hobart on a yearly basis – and prices still increasing in many individual suburbs – the popular opinion is that prices are crashing. This opinion can likely be attributed to the notable disparity between today’s auction clearance rates and clearance rates from this time last year; however, I have a different view. While clearance rates are lower, nearly one out of every two properties on the market is still selling.
I believe that if interest rates and unemployment were to increase substantially in the coming months, there would be an opportunity for the sort of market crash that some are predicting but this seems unlikely.
At this point, there is no clear indication of how long this price correction will last. The Australian market may experience a significant period of stagnant growth with sales being led by negotiation between buyers, sellers and agents.
For those looking to buy or invest in the coming months, I would recommend that you first and foremost look to secure finance. The Banking Royal Commission (and other factors) has made it challenging for many to secure finance, and after all, you need finance to be able to be in a position to secure property and compete against other buyers. Start this process early and have a clear budget in mind that you stick to.
Investors should be cautious not to buy properties for rental return alone, as there are a number of marketplaces that may experience an influx of properties over the short term, which could skew yields. Off the plan sales are a key area to watch. Investors should also be wary that there may be a considerable amount of competition, as prices continue to drop in some cities.
A good strategy for investors is to have contingency funds available for periods of vacancy or reduced rental return. A contingency fund can help one ride out bumps in the market and any long periods of vacancy. And if you find a good tenant, consider incentivising them to stay as a tenant. Paying for their gardening or providing them with slightly reduced rent are both common strategies aimed at rewarding and keeping good tenants.
Buyers and investors alike should endeavour to build and maintain strong working relationships with relevant real estate agents. Be proactive with your research and communicate with the agents regularly so that if a property arises that matches your goals, you may be one of the first contacted and can act quickly.
While a price correction is underway in the market at present, this scenario is presenting unique buying opportunities. Obtaining finance early, clearly defining your budget, creating a contingency fund and developing strong relationships with local agents – are all factors that will place you in a strong position to buy property and to help ensure your investment is successful.
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