Market update Aug 22 – Why Spring may provide the best buying window of the cycle, why Brisbane’s decline increased dramatically & Melbourne’s slowed despite leading negative sentiment & more! (Ep.171)

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In this week’s episode, Dave, Cate and Pete take you through:

  1. Rate of decline speeds up in most capitals

Over the month of August, the rate of decline has increased, while in a surprise move, Melbourne’s decline has slowed. Shockingly, Brisbane has jumped from –0.8% in July to –1.8% in August. No doubt due to proposed changes to land tax, flooding and the previous heat in the market. The trio discuss the trough to peak for the capitals and what’s likely to happen next. 

  • National: -1.6% (fourth consecutive month of value decline and largest decline since 1983)
    • Combined capitals: -1.6%
    • Combined regionals: -1.5%
  • Capital Cities
    • Darwin: 0.9% after 0.5% last month (only capital city not in downturn)
    • Adelaide: -0.1% after 0.4% last month
    • Perth: -0.2% after 0.2% last month
    • Melbourne: -1.2% after -1.5% last month
    • Canberra: -1.7% after -1.1% last month
    • Hobart: -1.7% after -1.5% last month
    • Brisbane: -1.8% after -0.8% last month
    • Sydney: -2.3% after -2.2% last month

  1. Rental market – Brisbane land tax is likely to make the rental situation worse

The trio canvas the proposed changes to land tax in Queensland which will likely cause more than a few investors to abandon the Queensland property market and sell up to first home owners, hence intensifying the rental shortage.  Rents in Brisbane are already up 14.1% annually for houses, which is likely to be further exacerbated. The greatest risk is that other states will jump onboard and aggregate land tax.

  1. The outlook for vacancy rates

Supply remains limited for rentals, with the tap of overseas migration just starting to be turned on. With new dwelling constructions starting to fall, the outlook is fairly grim, particularly given the Australian Government has increased the target figure for new arrivals.

  1. Listings to increase over spring

Supply of stock on the market is set to increase, with covid in the rear-view mirror and spring time on our doorstep. Old (180 day+) listing numbers have started to climb, showing that buyer FOMO and desperation have calmed. Total listings are tracking above the 5-year average, a sign that vendors want to sell before the market drops further. The trio discuss how listings and monthly growth our closely interrelated. The biggest increase in annual listings can be seen in Hobart and Sydney, which also show the largest drop in property values. While Adelaide has the largest drop in annual listings and is the strongest market this year. 

  1. Consumer sentiment

The house price expectations index has dropped for the first time below 100 as consumer sentiment overall takes a hit. Victoria remains the most pessimistic, with a 17.7% drop over August from 99 to 81.6. The trio discuss what this could mean for inflation. 

  1. Finance continues to fall over July

Lending activity continues to slow and mostly investors and business construction has been impacted. The bond yield spiked after the US Federal Reserve Chairman spoke and indicated that the US will do whatever it takes to curb inflation. However, expectations have settled again at 3.1% for the cash rate and we are on our way to hit a 3% cash rate towards the end of the year. 

  1. Victoria leads the unemployment decline but wages are not taking flight

Unemployment drops again to 3.40%, while Victoria leads the pack with the lowest unemployment on record at 3.10%. With the low level of unemployment, it is interesting that wages are not skyrocketing. The trio discuss the delicate tight rope walk of increasing wages, as wage growth must stay under control to tame inflation. Wages should increase, but not at the same rate. 

Gold Nuggets

David Johnston – The Property Planner’s Golden nugget: I think the back end of this year will be the best time for buying for any would-be buyers.

Cate Bakos – The Property Buyer’s Golden nugget: let’s all enjoy fresh produce and lettuce again, next Tuesday is taco Tuesday and I can’t wait


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