There’s no shortage of opinions on the property cycle. But there are some definite indicators to determine the state of the market.
Cool or hot? In decline or stagnant? We see plenty of terms bandied about to describe the state of the property market. From economists and real estate players, to investment experts, short, medium and long-term forecasts are easy to find but somehow no two ever seem to agree.
But if you’re looking to buy a home or investment property, you’ll be most concerned with doing the research to find out the state of the market right when you embark on the search for the ideal property, to determine if you’ll be getting a good price.
What to consider
For buyers, there are a few primary considerations: timing, price, location and potential for growth in value. After all, whether you’re buying a home to live in or rent it out to tenants, it’s an investment. And if you decide to sell one day, you want some indication that your property will have increased in value.
Property market indicators
There are a number of factors that may help identify if the market is going to peak. These can include moderating auction clearance rates, stable rental rates, rising supply levels and declining mortgage activity. If banks are starting to apply tighter lending requirements, this could also see investment demand moderate as well.
Signs that the property market is heating up can include a boost in auction clearance rates and rising house prices. Monthly reports are widely available, and you can compare monthly auction clearance rates and house prices to see how they’re trending.
Meanwhile, you can expect the market to cool if auction clearance rates are dropping,listings are down, and median house prices are falling.
These can be influenced by a few factors: supply and demand, interest rates and negative gearing. If property prices are high, it generally means the market is strong, but that may also mean it could peak soon.
Australia has seen historically low interest rates since the 2008 global financial crisis, which can be an incentive to potential buyers and investors. It can strengthen the property market – and as interest rates drop, house prices may rise.