The Australian residential property market is an interesting place at the moment. The release of a variety of different statistics in November has indicated that the Reserve Bank's decision to increase interest rates this month (and the subsequent larger increases by the four major banks) may have translated to a behavioural change in the property market.
From my position at Century 21, I think that it can be reasonably assumed that buyers are eyeing the property market with caution at the moment. Home buyer grants have been pulled back, mortgage payments will have increased with the interest rate rise and there is some uncertainty concerning how the RBA will act in December and throughout 2011.
It is not surprising then, that activity in the national rental market has increased. The RP Data-Rismark Home Value Index (released at the beginning of November) showed a national increase of 3.3 per cent in capital city house rents and 0.6 per cent in unit rents over the last quarter. This increase in rental prices suggests that more people are choosing to rent, reducing the number of properties available and pushing prices upwards.
Another interesting piece of data concerns the national auction clearance rate which was recently reported by Australian Property Monitors to be at 52 per cent, quite a reduction from where we saw it at the beginning of the year. It seems that while homes are still going to auction, bidders are not reaching the reserve price, resulting in the passing-in of nearly half of auctioned properties.
So what do these figures mean for home buyers? In my view, such conditions could mean some prime buying opportunities if prospective purchasers approach the market in a smart way.
With the increased activity and prices in the rental market, it may be a good time for property investors to take advantage of the potential for increased future income streams and consider investing in a rental property. On the flip side, increases in weekly rents could be quite an incentive for those currently renting, but who are in a position to purchase property, to think seriously about entering the market, turning rental payments into mortgage repayments.
In terms of reduced auction clearance rates, this may not mean that passed-in properties fail to sell at all; it is also possible that sales occur after the auction has been concluded. If auctions prove to be unsuccessful, buyers could find themselves in situations with reduced competition and therefore potentially increased negotiating power. Use this to your advantage and be ready, immediately post-auction, to discuss the property with the vendor – such negotiations very often result in an advantageous result for both buyers and sellers.
Try not to let interest rate uncertainty and other factors deter you from purchasing property in the current market. There are definitely many situations that could be advantageous and buyers need to be ready to act on them in an intelligent manner.