Across Australia, we’re still seeing the lowest levels of stock that we’ve seen in more than five years. That includes the most recent house price boom between 2015 and 2017 and the current rising market. Now that sentiment in the housing market is improving, why are stock levels so low?
One of the major reasons stock levels in Australia continue to dwindle, is the high transaction costs involved in buying and selling property. The main issue for many is stamp duty, which is particularly relevant in our two highest-priced cities, Sydney and Melbourne. Stamp duty is a disincentive for people to change properties, and we see this commonly with potential down-sizers who choose to stay in their current property because of the costs involved.
Selling Off Market
Over the past 12 months, we’ve also seen a big push from vendors looking to sell off-market. An off-market transaction occurs when a property is not listed on a real estate portal. Initially, these types of transactions began occurring because of the uncertainty in the property market. However, because of the strong demand and record low interest rates, we’re now seeing aggressive buyers looking to purchase a property before an agent lists it.
Over the past decade, we have seen an increasing number of people decide to renovate their properties and upgrade. With the high transaction costs involved, when moving to a new house, it makes sense that many would prefer to put that money into upgrading their own homes. Similarly, in the last 12 months, there have been a number of government incentives aimed at getting people to renovate or build, and this has seen many choose to stay rather than sell.
Since COVID, we’ve seen many Australians who have been living overseas returning home. This specific demographic of the market is typically well-paid and prefer to own property. Because of their return, we are seeing the high-end of the property market in Australia with the largest price gains, and much of it is being driven by strong buying interest from Australians returning home.
House prices are rising at the fastest rate in 32 years, and while there is strong demand from buyers, one of the main factors driving prices is low stock levels. Therefore we have to ask the question; How to Buy in a Rising Market?
How to Buy in a Rising Market?
House prices across Australia are continuing to see a sharp rise, and that can make it very tricky for buyers. Clearly, most states are in the grip of a seller’s market, so it’s important to both adjust your expectations and know how to buy when prices are rising.
Have finance organised
Arguably, the most important element of buying a property during any market is to make sure you have your finance organised. However, when markets are rising, you not only need to know how much you can spend, but you need the confidence to be able to act quickly. As prices move higher, we also see the time it takes to sell a property, fall dramatically. As a buyer, if you have a preapproval in place, you’ll be able to make an offer early and have the confidence that your finance won’t be an issue.
Look at all options
Most Australian’s like to browse the real estate portals and then attend open homes on the weekend. Unfortunately, when markets are hot, you need more options, or you’ll be stuck fighting over the few properties that are actually listed for sale. One of the most effective things you can do is get on the email list of the leading agents in the suburb or suburbs in which you are wanting to buy. Sales agents often let people know about upcoming listings, and if you are confident and prepared, you might be able to make an offer before the listing ever sees the light of day.
Do your research
When markets are moving, it seems as if every property is selling well above its asking price. It is incumbent upon you, the buyer, to understand where the market is at in your area of interest, and the best way to do that is to track recent sales. By understanding what’s selling, you will know what a fair price is and also how long you have to act. Talk to all the sales agents in your area if you want even more insight as they are the ones who are always on the pulse of the market.
Manage your expectations
When markets are moving, it’s unlikely that you’re going to get a significant discount on a property that has multiple interested parties. If a market is rising by 5% each quarter, it’s conceivable that from the time you began your search to when you go to put in an offer, some property might have appreciated sharply in value. Again, you will need to know your market and put in an offer that is competitive. There’s no point fighting over a few thousand dollars and missing out when houses are rising by double digits on an annual basis.