As someone who is currently looking at purchasing a home and is also in the industry, I have observed quite a shift over the past few months in the market that I wanted to share and see if you have found the same?
Working in the industry, and also being a client at the same time, always provides an interesting perspective on things. One thing that has become apparent is a definite shift in the market over the past few months:
Tighter lending requirements brought on by APRA and The Royal Banking Commission (see our previous article here) is having a significant effect on the market. Effectively lending approvals are now harder and taking longer to obtain. Banks are lending less than previous to people as they now have to take a deeper looking into individuals spending behaviours and patterns before approving lending. As such, they are being much more conservative on how much borrowing capacity they provide. Properties are currently getting contract offers subject to finance, however there is a large proportion of contracts falling through due to finance not being approved.
I have been to many auctions of late and the trends seems to be no registered bidders on auction day. This seems to be even more evident by auction clearance rates dropping into the 30th percentiles over the past months – whereas previously they were up at the 60th percentile or more. Talking to many agents the common reason for this trend appears to be that buyers are not in the position to purchase under auction conditions (unconditional) primarily due to lending restrictions.
The downwards shift in the market over the past few months cannot be ignored. Developers who started developments at the beginning of the year are expecting the same returns that were being offered at that time, however that is not the case now. Bank valuations aren’t holding up, developer premiums are not being achieved. This has resulted in properties being on the market for longer and properties are being sold at reduced pricing, thus affecting CMAs (comparable market analysis) and as a result a slowing housing market.
For those home owners wanting to sell their current home and upgrade or purchase a new one the “flow on effect” seems to be occurring. What I am referring to is that they may have a contract on their current property and therefore sign another contact on their new property subject to the sale of their existing home. Unfortunately, due to tighter lending requirements the contract on their current home is falling through and the “flow on effect” of the contract of their proposed new home also then falls through. This is equating to two contracts not being fulfilled, not just one.
With an election in the near future and the whispers of Labour wanting to remove Negative Gearing, a lot of people looking to invest in property are nervous. Property investment will become less financially attractive if negative gearing is removed. It is anticipated that should this happen, many investors will look to get their money out of property and invest in other more profitable ventures. This will see an increase in supply over demand on the property market and a further reduction in property prices.
In summary there is definitely a slowing of the Brisbane property market in the lead up to Christmas. It will be interesting to watch over the coming months what will happen. As a purchaser it is an exciting but nervous time – can I grab a bargain now or will I purchase at a higher price than I can in 6 months time? The answer to this no one truly knows. If your ready to buy and you find a house you love and can afford, to be honest you can’t really go wrong.
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