18 JUNE - MARKET COMMENTARY, REAL ESTATE, MARKET UPDATE

Lots of Winter Pressure - Easing Ahead

As we come into this winter market with lots of positive activity still afoot, I feel a sense of uncertainty from many of my sellers and buyers out there.

And it is no wonder why with the new tax policies and bright-line extension implemented by the government, the unprecedented world event of COVID, supply chain restrictions, labour shortages, International tensions between major super powers, and massive borrowing and public investing. The idea that anyone knows what will happen, especially longer-term, is something of a fugazi or farce.

Albeit the ability to forecast longer-term predictions or ideas is just about impossible, we can focus on the more foreseeable shorter-term periods ahead—for example, the rest of this year 2021 and the start of next year.

What we see now is good price pressure. All areas are still seeing price increases and predominantly based on reduced listings/stock. Several factors causing this are;

1. Lack of people upgrading homes. With overseas travel off and low listings of good homes for people to step up into coupled with the governments' new bright-line test concerns, families are more often adopting renovating their existing home and staying put.
2. Labour and supply problems for the building sector. With an ever-increasing demand from homes, this slowdown impacts new builds or renovation projects coming to market. They will come, but the flow is becoming more of a trickle.
3. Uncertainty causes people to hold off deciding to move or make changes.
4. Seasonal slowdown. We typically see a stock reduction through the May to August period. This has only been exacerbated by the high demand and large sale volumes of existing stock through the summer and autumn months prior.

Open home and buyer numbers have decreased, but this is seasonal to a degree and is currently matched by the reduced listing numbers keeping the current market tight. Auction clearance rates are also falling mildly, with the average number of bidders dropping to just under two per property. Albeit it is still a seller's market and prices are going up, we are seeing the active numbers of buyers and overall pressure start to reduce. Some factors include investors diversifying from existing residential housing, banks tightening up on lending, hesitation from buyers thinking the market is changing and adopting a wait and see attitude, and the seasonal demand variances.

Average days on the market for homes is just starting to creep out again, and with all the above considered, a general slowing, not a retreat of the marketplace over the rest of the year to early next year, is expected.

We have experienced an average of 18% growth over the last 12 months and peaking year on year this May (May last years was on the back of COVID, so it was low) at a staggering 33% increase in median sale price. The truth is that the market needs a bit of slowing as an exaggerated market only leads to the bubble effect and a more aggressive rebound or realignment at some stage which is more damaging overall.

Inflation is on the rise, and with it, interest rates will follow. Indications are that we will see some more significant movements throughout next year and further following in 2023 and 2024. Most major banks have increased their longer-term rates already under this belief. This will result in additional house price easing over the years ahead.

My view is that we will benefit from a 10% capital gain growth this year and the following years softening further but still providing mild growth under an overall shortage in housing supply.

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