Is 2019 a Good Time to Buy?
There’s no getting away from the fact that house and apartment prices are falling across most Capital Cities. It’s by no means a uniform pattern across all markets but it would be foolish to suggest otherwise.
However, the housing market is multifaceted, and David Chittenden, Director, Project Marketing Residential, believes that the current pessimistic outlook needs a measured response that’s not simply either ‘boom’ or ‘gloom’.
David suggests that a sensible view of the fundamentals that have always driven the residential sector, shows that with careful consideration and solid finances it’s a good time to buy.
However, confidence this year has been impacted by a very unusual set of circumstances including the Hayne Royal Commission, the NSW State Election. the Federal Election and Federal Budget.
We have also seen interest rates from the major lenders jump around and that has also created further uncertainty among buyers. New home-loan rates remain very attractive and RBA interest rate policy has been stable.
“We have seen the recommendations of the Banking Royal Commission delivered, however both sides of politics have advised that they will not implement the recommendations relating to mortgage brokerage and trial commissions.
“The reversal of a policy that might have restricted the role of mortgage brokers was a welcome sign indicating that any response would be more measured. We now need to wait and see how soon banks and regulators will start to free-up lending, and there are early signs that’s already happening.
“It’s a positive for the market that neither the NSW Election or indeed the Federal Budget produced any sort of shock. The State Government influences the delivery of most services and new infrastructure that are central to a healthy housing market, and stable government is really important to buyers and the wider community.
According to David, having the State Election, Royal Commission and Federal Budget done will help the residential market settle.
However, there’s still hesitation surrounding the Federal Elections’ possible impact on the market and that will continue to be an off-putting influence that’s capable of short-term market distortion.
For the first time in many years, the 2019 Federal Election will focus on a number of policies that could directly impact the housing market including negative gearing, capital gains and superannuation. The election will also determine the formal legislative and policy responses to the Hayne Royal Commission.
Looking Beyond Politics
Over the last 6-12 months there have been notable impacts on the market potentially benefiting some buyers, reducing competition in the residential market. We’ve seen off-shore buyers and some classes of investors leave the market however, for local buyers both these events are positive.
“While we’ve seen the emergence of what I’d call ‘wait-and-see’ buyers, there’s none-the-less more activity and more confidence slowly building. We see this with greater levels of general enquiries, more people are looking.
“However, that’s not translated into any sort of rush, buyers are still taking much more time about any purchase, but they are aware of the potential of more opportunity.”
It is in this market where, driven by very competitive interest rates and in particular deals for first-time buyers, that anyone sick of paying rent are now starting to see real value in today’s market.
However, the biggest concern among buyers and indeed vendors is, when will prices stabilise, level-out and even start to rise again?
“There’s no way of predicting when prices will bottom or start rising. There’s also another side to answering this question and that’s the stark reality that future supply is also falling rapidly.
“The result is that while we see prices falling, so is the supply of land, plus, new apartment projects have slowed, and new home construction is also rapidly falling.
There are predictions of an under-supply of housing as early as 2021-22, and this will then fuel price rises. Where once the market was driven upwards by buyers’ fear of missing out, now the question is how long can buyers afford to wait and see?
The Risk of Waiting
There’s soon going to be the risk of missing out altogether, of missing an opportunity to take advantage of a basket of positive factors that any buyer should consider; less competition, attractive interest rates, positive infrastructure works, full employment and in many areas developer incentives that have or will soon peak.
Waiting for prices to fall and keep falling might just mean buyers may never have the same opportunity again and it’s hard to put a price on that!
“In today’s market we should keep in mind that supply is now slowing and that has every prospect of pushing up prices in the future. Reversing any supply short-fall is not a short-term fix and while population growth might slow a complete reversal of growth patterns is unlikely.”
You’re ready to buy, finance looks OK, the property is ideal, you don’t want to miss the opportunity, but there’s still the question of price, what you’re willing to pay?
While some would describe today’s residential market as ‘a buyer’s market’ which it is however, this does not mean that prices will simply keep falling. Headlines about buyers trying to ‘steal’ a purchase underscore this fact.
For a variety of reasons, they will not keep falling, vendors might withdraw their properties, developers will and have delayed new projects and distress sales are now common and now supply has started to measurably slow.
We no longer have ‘eye watering high-prices’ but we also do not have a market in free-fall, on balance ‘when to buy’ will always be a matter of personal and financial judgement along with a careful mix of optimism and planning for the future.
Right now, I suggest that it’s an opportune market for buyers and that’s not limited to the occasional bargain. It’s more about value for money for the right property that ticks all the boxes and suits anyone’s personal or investment goals for the longer-term.
Predictions beyond 2020/21 forecast undersupplied markets, already the supply of new land lots along the east coast is at a five-year low and cranes are starting to disappear from the skyline.
After the Federal Election and with a stable economic outlook we should see more stable prices. However, the likelihood of low supply just a few years away, continued demand and population growth may well push-up prices and reverse the current favourable buyer’s market dynamics.
This quote from Warren Buffett is perhaps a good summary: “Games are won by players who focus on the playing field—not by those whose eyes are glued to the scoreboard. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am sceptical of those who claim sustained success at doing so.”