Welcome to the September edition of Month in Review
Spring 2023 promises to continue the “interesting times” for Australia’s residential real estate stakeholders.
The season has long been recognised as the market’s peak listing period. It’s a time when homes look their best and buyers are gearing up to settle on a property before year’s end.
The difference this year is that spring has sprung early. Listings began rising in July in response to the RBA leaving rates on hold. Sellers were eager to list in the more certain market conditions – many reasoning it would be best to beat the rush in September/October. Buyers have been similarly more confident about the market and the cost of borrowing.
The result has been not only more transactions, but capital gains too. Most major centres where prices had been fairly dormant throughout 2022 and early 2023 saw between two and 3.5 per cent price growth in the three months to the end of August.
I note this more buoyant market is triggering a large cohort of investors to look at selling so as to realise their longer-term capital gains before more properties flood the market. No doubt these landlords have also been prompted to list by uncertainty surrounding legislative and tax changes that could result from political responses to the housing crisis.
In short, investors are looking for investment options with more stability.
Interestingly, many will find that stability in the commercial sector.
This month’s commercial section covers entry-level retail investment across the country. The retail sector has struggled in recent years but our contributors note that a large percentage of the downturn has already been priced in and now those who apply the right fundamentals to their asset selection are being rewarded with steady cashflows and reasonable long-term capital growth prospects.
Another subject covered by our teams this month is residential renovations and what’s driving demand for both homes needing renovation as well as properties that have already undergone upgrades. This discussion is of course couched in the context of rising building costs. While increasing construction costs have been a common theme throughout the past three years or so, there is a new inflection point we’re observing now. Supply lines and manufacturing have tracked back towards more normal levels, so materials are becoming more affordable. In contrast, however, there remains high demand for certain types of contractors and trades. The net result is that the total cost of building and renovating remains high and is having a notable impact on the market. For those who like a silver lining, it does mean certain buyers can secure prime, unrenovated property at a reasonable price. This could include first homebuyers who can live with a home in less-than-perfect-condition with a view to doing some upgrades in the years to come.
Yes, the interesting times remain for Australia’s property market participants. The best course of action to mitigate risks and elevate upsides is always to rely on independent advice from a professional source.