The Eastern Suburbs Property Market: Thoughts from the Front Line – Sebastian Maxwell.
Laing+Simmons Double Bay’s Sebastian Maxwell shares his Thoughts from the Front Line:
Every week I repeatedly get asked the same question from buyers and clients alike; “what’s the market doing?”, “are prices still falling?”, “is it a good time to sell”, and the list goes on. The obvious reality is that, as weeks and months go by, the answer to this question changes and evolves. Markets change and expectations on market direction can shift very quickly, sometimes all it takes is one negative media article to affect buyer demand and investor sentiment – the market is in a constant state of flux. Therefore, suggesting with certainty a conclusion on exactly where the market is going and what prices are likely to do is, in some ways, an exercise in futility. A more beneficial and informed approach to navigating these questions (and the purpose of this article) is to deeply engage with and understand market trends, buyer activity, and additional factors affecting market conditions. To complement this market research, I am able to provide my ‘thoughts from the front line’ on where the Sydney market is likely to move over the short to medium term. My position as Senior sales executive at Laing and Simmons, Double Bay puts me in an advantageous position to understand with particular clarity where we believe the market is likely to head.
Factor 1 – The Federal Election:
Back in May of this year, the Liberal party and Scott Morrison shocked the nation (and indeed every bookmaker) when he pulled off a miracle, defeated the opposition and took leadership of Australian Government. This single factor has been one of the largest underpinning drivers of demand in the local market as it removed the uncertainty around the proposed abolition of negative gearing and taxation laws with respect to investment properties. This has boosted buyer confidence and increased traffic across all of our open homes.
Factor 2 – Interest Rates:
It has become clear, through the last two meetings of the Reserve Bank of Australia (RBA) meetings that Phillip Lowe (the RBA governor) has decided to reduce federal interest rates, cutting by 25 basis points two consecutive months in a row to a historic record low of just 1%. As you might imagine, aggressively cutting rates in rapid succession drives demand for investment assets up, with property and stocks at the top of the list. Since these interest rates cuts, two things have happened; on Monday the 29th of July 2019 the Australian stock market reached an all-time record high, and the property market decline has completely reversed, indicated by auction clearance rates which reached 73% last weekend across Sydney. Phillip Lowe in his latest press conference also indicated that further interest rate cuts cannot be ruled out and that they will be largely data-driven in their decision.
Factor 3 – APRA: Australian Prudential Regulatory Authority
The Australian Prudential Regulation Authority has also announced changes to the lending criteria for banks, the change effective as of June 2019 removed the requirement for banks to ‘stress test’ their new mortgage clients at a rate of 7%. Instead banks are now only required to ‘stress test’ borrowers at a rate of 2.5% above the current interest rate. As one might expect the affect this has was to substantially increase the borrowing capacity of buyers which (if history is any indication) will push Sydney property prices higher in the short to medium term.
Given the combined market changes and factors listed above it is my opinion that the property market is on the precipice of a significant move higher over the next 12 months. Naturally, there are markets within markets thus some parts of the market may move more than others i.e sub $1m first home buyers market may move differently to the $5m+ market as different factors affect each subsection of the property market. This presents an excellent window of opportunity for anyone looking to sell into a confident and buoyant market.
Sebastian Maxwell is a senior sales executive with Laing and Simmons in Double Bay. Sebastian draws upon his background in finance and current exposure to residential property market trends to provide the most up to date analysis of the movement of the market. If you would like to discuss market trends with a view to buying or selling, please contact Sebastian at: firstname.lastname@example.org or call on 0409 449 929