How to successfully navigate the cooling market
We learned last week that Australia’s capital city house prices had fallen for the first time in two years. Australia’s median house price is now sitting at $1.065 million, 0.9% below last quarter’s record high.
As both the cash rate and interest rates rise to curb inflation, and fresh off the announcement of the latest cash rate increase, the media is placing a strong focus on property markets. We spoke to property experts around Australia to understand what these changes mean for buyers and sellers. We also asked for their advice on how to successfully navigate the upcoming Spring period, which normally sees more buyers and sellers on the market.
Where is the market headed?
BuyersBuyers’ most recent Investor Special Report explains that, “Australia’s housing market will be digesting the prospect of rising interest rates over the next six months, leading to a downturn which will present some opportunities for counter-cyclical investors.”
Economist and BuyersBuyers co-founder, Pete Wargent said, “The prospect of the cash rate target potentially rising from close to zero towards 3% by the end of this year will be a serious handbrake on housing market sentiment and activity.” Pete advises, “Our best estimate is that the property market downturn will continue for as long as borrowers fear rising mortgage rates, led by Sydney and Melbourne, and this is likely to mean for at least the remainder of 2022”.
“The flip side to this is that the underlying housing market fundamentals are strengthening, with immigration visas set to be fast-tracked to address Australia’s skills shortage, the lowest unemployment rate in 50 years, and incomes now rising.” Pete said.
So it’s not all bad news, but many sellers and buyers are unsure of when to make their next move, and what move that should be. Here are what Australia’s top agents from around the country have to say:
How can sellers avoid getting caught in chasing the market down right now?
Set realistic sale price expectations.
The market today is slower than it was six months ago. Six months ago you could expect to sell above your listing price. In this market, you’re likely to get what you list at.
Justin Davies, Director of Space Realty in WA, advises, “You’re only in danger of chasing the market down if you have sale price expectations based on the market of six months ago. During that time, the market was moving so fast that most vendors could expect to sell above their asking price. In circumstances where the market slows, people must adjust their selling price so that they don’t chase the market down. Price your home at the right price, to begin with.”
Andrew McCulloch, CEO of Ray White NSW, explains, “It is important to be realistic in meeting the market. Equally, keep in mind that when selling in a slow market like this, you are also potentially buying in a lower market – there are plenty of benefits in transacting right now.”
Don’t neglect the basics when it comes to selling your house.
Cooling markets can encourage sellers to focus on the wrong things, and worse, neglect the good old fundamentals of a property sale campaign.
Hayley Van de Ven, Principal RE/MAX Results and RE/MAX Bayside advises, “Sellers can take immediate action and ensure they consider the three key areas – price, promotion, and presentation of the property. Don’t let one area of your campaign cost you thousands, or in some cases hundreds of thousands, in chasing a falling market.”
How can buyers capitalise on this cooling market right now?
Remember, this cooling-off is all part of a cycle.
As Andrew points out above, there are plenty of benefits to transacting in a cooling market. You may be able to find some good deals on the market as a buyer. As always, it’s important to do thorough research and not overextend yourself. But, if a house purchase is within your means during this time, it could be the perfect time to buy.
Hayley explains, “Buyers have a unique opportunity to capitalise on negative media right now. I believe the biggest winners in this market will be the buyers that purchase in this period of uncertainty. When the market levels and the buyers return, those who have acted decisively during this time will be happy to have snapped something up at a good price.”
Prepare yourself for a quick, clean sale.
Those selling in this changing market are not messing around. Agents are setting realistic prices and expectations for sellers, who are wanting to get that transaction complete as soon as possible.
Andrew says, “If you are selling at the moment you are not simply testing the market, you are a genuine seller. Therefore, buying in this market can be beneficial as you are dealing with real sellers and less time-wasting.”
Justin adds, “For a buyer to act competitively in this market, they need to have their finances worked out and have a clean offer for a quick settlement. When a seller wants to sell quickly, it’ll be the buyer with the ‘cleanest’ offer in terms of finance and conditions that wins. Those sellers will often choose a cash offer at a lower price rather than considering a higher offer with complicated conditions.”
What are agents doing right now to get vendors the best sale price?
Forget the media hype: pay attention to real local data.
Property price drops are all over the news right now. While they’re not wrong, they’re not all right. It’s important to go to the suburb level to understand what is happening where you are selling or buying.
Andrew says, “One of the issues we have right now is that buyers are listening to the media who often make things sound worse than they are. Then, we have sellers who are looking at past sales as ‘what to expect’ and forget that we are in a different market now.”
Hayley adds, “Right now, more than ever, agents are talking in real statistics and data rather than media hype. Data is your only defence in the face of buyer sentiment.”
Auctions all the way.
Andrew says, “There is no doubt that auction is the way to go in this market at the moment. Last week, we saw an auction in Western Sydney with 25 registered bidders. This kind of turnout happens when you have a realistic, educated vendor that is well-informed by us.”
Build your own momentum.
Justin explains, “The market has lost the urgency that it had six months ago. The most important thing an agent can do in this market is to create a reinvigorated sense of urgency and excitement around the campaign. Of course, this is what agents always do, but when the market was rushing ahead at fever-pitch last year you didn’t need to create a sense of urgency, because that was the buyers’ mindset.” He adds, “Now, it’s important for agents to use all tools available to build that urgency, excitement, and momentum.”
Key takeaways for buyers:
- Remember this cooling off is part of a cycle. Cooling markets can present a great opportunity for decisive buyers
- Prepare yourself for a nice, quick, clean sale with organised finances and an uncomplicated offer.
Key takeaways for sellers:
- Set realistic sale price expectations
- Don’t neglect the basics with your property campaign: price, promotion, presentation – and give your campaign the best chance to be seen by more buyers by listing in more places
- Forget the media hype: pay attention to real local data and expertise
- Build your own momentum – use all listing and promotion tools available to create urgency throughout your campaign, including sharing your listing links on social media and asking friends and family to do the same.
Did you know that if your property is listed on Homely, you can write a street review to boost your listing? Ask your agent about listing on Homely and writing your own vendor street review to help your campaign work as hard as possible.