Just when the pundits were saying the market had peaked, it seems the property market – for established houses in Sydney and Melbourne at least – has a second wind.
Research from the Domain Group showed that Melbourne house prices surged 3.1 percent for the September Quarter, while those in Sydney were up 2.7 percent.
“Sydney: the Boom is Back” was the headline, one which would put any Sydney househunter off their weekend breakfast.
While these increases, driven by low interest rates, population growth and strong economies, were the headlines, they obscured two more – perhaps equally important – trends: house prices in some other state capitals are starting to fall, and the forecast softening in the apartment market is a real thing.
The Domain figures show that while house prices in Canberra are rising (2.3 percent for the quarter) and also in Hobart (only just at 0.4 percent), all other capitals are starting to go backwards.
AMP Capital economist Shane Oliver came out with a warning for househunters on Friday. “Don’t buy now” was his cry, and it is easy to understand why.
His reasoning was that Sydney and Melbourne prices were unsustainable at this level, and a correction was inevitable.
As far as the other markets are concerned, if they are going backwards now, wouldn’t it be smart to wait for a bit until they fall a bit further?
With rents falling around the country, there is a strong argument in favour of parking your money, building up your deposit and finding somewhere nice – and affordable – to rent while you watch where the market goes next.
Conventional economics would suggest that the higher than expected inflation result this week – 0.7 percent for the September quarter – means the Reserve Bank of Australia is now unlikely to cut interest rates any further.
Interest rates are most often a cycle. They move in a direction, stop, and then start moving the other way.
If inflation takes hold, then future moves in interest rates could be up, and not down.
This, the theory goes, would take the wind out of prices and cause a shakeout as debt strapped buyers head for the exits. For cashed up buyers at this point, that would be an opportunity.
As far as apartments are concerned, some of the same argument applies. If the market is on its way down, why buy now?
This is just one way to look at the market of course. If you are ready to buy and your dream home is in sight, good luck!
Some of the rest of us, however, might find something else to do on Saturdays for a while, instead of attending open inspections.