How to spot when the property market is turning

Experts reveal the subtle and not-so-subtle indications buyers and sellers need to keep an eye out for, to indicate a shift in the property market.

At a Melbourne home auction in December, Real Estate Buyers Agents Association of Australia president Cate Bakos watched the market turn.

Ms Bakos said the home she had rated a seven or eight out of 10 was nice, though could use work and was not in the suburb’s best street.

It sold $280,000 above what she had expected, with multiple bidders.

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The previous week it had been a clear buyers’ market where only fully renovated, well-presented homes in top streets sold well.

Ms Bakos said homes a bit farther down purchasers’ shopping lists often gave the best insights into whether the market was about to change direction.

But there are other signs.

AUCTION ACTION

Changes in the weekly clearance rate for auctions can give a sign of a market that’s started to rise or fall. But watching how individual properties sell under the hammer can be even better.

PropTrack economist Anne Flaherty said watching what happened under the hammer was one of the best predictors of a turn in home fortunes.

In the second half of 2022 a bit over 50 per cent of Aussie homes sold at auction as rising interest rates suppressed borrowing capacities and put the brakes on most capital cities’ property value growth.

Today, Ms Flaherty said the clearance rate was back in the 60s.

Key things to watch in the near future would be for a rise in listings, which could turn things back in buyers’ favour, or a rise in bidders at auctions indicating the supply of homes for sale was becoming tighter.

Ms Flaherty said rising numbers at open for inspections was another sign there could soon be a “competitive market to buy in”.

JOBS AND GROWTH

A rise in unemployment can also signal a shift in the home market’s fortunes.

While the economist warned against paying too much attention to gloomy headlines about property at present, reports of a growing number of sellers being forced to put their home on the market this year might signal a shift back in buyers’ favour.

A surge in job losses could also impact the number of listings on the market and make things harder for sellers.

Ms Bakos said after several months of rising interest rates, the Reserve Bank’s decision to hold steady in April could put more home hunters on the offensive.

“The only thing I can think of that has regularly impacted buyer sentiment is fear about interest rate increases and cost of living,” she said.

OUTSIDE INFLUENCES

Government and regulatory group changes can also create sudden shifts in market activity.

Ms Bakos added that monetary policy changes by the Australian Prudential Regulation Authority, as well as changes to or the creation of new government policies had all impacted the market in the past.

When the banking royal commission left banks more cautious about lending throughout 2018, home sales struggled.

And in 2019 the ALP went to the federal election with a plan to change negative gearing, resulting in what the buyer’s agent described as one of the quietest periods she could recall for her profession.

“That caused a lot of nerves and there was a risk of investors choosing to sell and flooding the market, causing oversupply,” she said. “And I had people who were waiting for that to crash the market so they could buy cheap. It felt really grim at the time.”

Similarly, she said that first-home buyer incentives could also cause sharp market rises.

AGENT INDICATORS

Agent behaviour can give away signs of how the market is really travelling.

Ms Bakos said if buyers were noticing more listings appearing as expressions of interest or private sale in an area where they were used to seeing auctions, that was often a sign they were trying to save their vendors from a failed auction.

Agents touting for early offers during an auction campaign could also be evidence of a market turn.

On the flip side, agents taking longer and longer to get back to you could be a sign the market is about to switch in sellers’ favour.

Ms Bakos said this extended to increasing difficulty arranging a private inspection, which agents would be less willing to do as a market heated up.

SIGNS OF A CHANGE

Auction Clearance Rates: A shift in auction sales success rates often heralds a broader market move.

Forced Sales: Rising cost of living or significant job losses that force owners to sell can precede housing pain.

Meddling: Changes to property policies by governments or regulatory groups, such as APRA or the RBA, can be a prelude to change.

Agent Behaviour: A shift in real estate agent behaviour, be it touting private sales instead of auctions, or in how long they take to get back to you, could also signal a market in flux.

Paying attention at the pub can also give you an insight into what lies ahead for the market.

The pub test: More talk about the property market at the pub or family gatherings is also often an indication public perceptions are changing for better or worse.

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