Real estate Australia: ‘New bottom’ could be coming for home prices

The lead up to Easter could finally begin to reveal where home prices are headed, whether interest rate hikes finally bite and fear engulfs the real estate market, or otherwise.

There are six main things you should know right now about Australia’s real estate market, from coast to coast and north to south.

1. Supply rates are more important than interest rates.

We have had 10 rate rises in a row. Rates have tripled. This is unprecedented, but why have not prices fallen off the cliff?

Simple: Lack of listings.

There is an under supply of listings, and this is what’s keeping prices from plunging. Don’t get me wrong.

NSW and Victoria have been hit by price falls of around 15 per cent depending on the location and type of property, and price range, but the drop in most areas is a lot lower that the 40-50 per cent increase during the Covid years.

Auction rates are up, but there’s a serious lack of supply. Picture: Julian Andrews.

2. There are no signs of distress selling. Yet.

Very little distressed selling or forced sales are being reported with that many rate rises, you would expect this to be happening, but in has not.

The main reason being is that with very low unemployment, borrowers know that they can pick up some extra hours to make up for an increase in their mortgage loan repayments.

However, this does not take into account the fixed rates that have just started to come off fixed and are moving to much higher variable rates.

Keep a look out for listing supply between now and Easter.

If listing numbers grow, and vendors are forced to sell, we may see a new bottom approach.

If this happens and there is fear in the market, we could see further drops and, they could be significant.

3. Perth and Adelaide are defying the trend

For many years the two markets that have had little growth are now not only surviving but the are thriving. They started with a low base and represent outstanding value. However, there are early signs Adelaide is now showing the steam is coming out of the market.

4. Auction clearance rates look healthy

They do surprisingly look good but let’s not forget – volumes are down. For example in the first week of March, in Sydney there were 851 auctions but the same week last year there was 1,202 auctions. In Melbourne over the same period it was 1,125 this year versus last year same week 1574. Smaller volumes can skew results.

Over that first week of March, there was 1,000 less auctions than the same week last year, all according to CoreLogic.

5. Real Estate Agents and Auctioneers are feeling the pressure

Real estate agents are remunerated primarily on volume.

That is, the number of sales – not necessarily price that they sell for. As expected, there are agents leaving the industry (normally the one who joined during the boom).

Some are joining other teams and working as assistants to stronger agents while others are going back to the industries they were in before they joined real estate.

I get approached regularly by auctioneers looking for work that I don’t have the capacity to take on, whilst other auctioneers are offering their services on Sundays to try and get some extra work.

6. Marketing & Negotiation Matters

There was a large proportion of properties being “off-market” during the Covid boom.

This is now over.

A home needs some serious advertising to get the attention of buyers. And agents need to be skilled negotiators to put the deal together.

The market is no longer putting the deal together. Houses are no longer selling themselves. You have to stand out to win out!

Tom Panos is an auctioneer, real estate coach and trainer.

Originally published as Real estate Australia: ‘New bottom’ could be coming for home prices