Spring is the busiest period in the real estate calendar but the spring we’re entering in 2018 is very different from a year ago.
Ever since the market started to cool down in December last year, we’ve experienced a softening in the market with lower clearance rates, more pass-ins and a decline in house price growth.
Starting after the AFL Grand Final this weekend, the typical spring selling period runs through to December, concluding in the lead up to the summer holidays. During this season we usually see an increase in property listings due to the warmer weather together with the Spring bloom that ensures our gardens are looking their best. This is one of the reasons why Spring is considered the best time of year to sell a property. This year, however, listings are tracking about 15% lower than this time last year. There are a number of reasons for this, but primarily vendors are reluctant to list their properties for sale in a weakening market. The pool of buyers has also dispersed with lending conditions much more restrictive and tighter than spring 2017. APRA has played a role in this, as has the Royal Commission into banking. Afterall, property is about confidence and eventually the negativity feeds into the psyche of both vendors and buyers.
I expect stock volumes this Spring to be lower than the previous year. I base this on the fact that the banks have tightened their lending and made it harder for people to get the finance they need for a property purchase. The uncertainty of the current political climate, with the Victorian state election in November and Federal election at the start of next year, will also impact market activity resulting in fewer transactions as people adopt a more cautious approach to property investment. Many vendors will wait until market conditions improve before listing their properties for sale. Uncertainty, around taxation policy concerning proposed capital gains tax changes and negative gearing is another factor playing on the mind of both buyers and sellers. Investors have also found it more difficult to fund their purchases with changes to interest only lending.
In reaction to the potential for higher interest rates and the banks increased lending restrictions, buyers have become more cautious, which explains why we’re currently seeing clearance rates under 60%. That’s about 10% lower than this time last year.
This Spring we’re not likely see as many homes sold under the hammer as before. I believe there will be in increase in pass-ins and homes sold before auctions. Clearance rates will remain in the 55 – 60%, which certainly turns this Spring into a buyers' market, providing that the buyer can qualify for a loan.
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