Property – The State of Play – May 2023
Working at the coal face we get a feel for market prior to data points being released. At present:
On the sales side……
The turning point for the property market arrived in February. This was due to a culmination of limited supply, a drop in property pricing, resetting ‘market’ and buyers coming to terms with their new ‘capacity level’, a result of financing requirements.
Our view is that we are at the top of the RBAs rate increase cycle. Even allowing for a further 0.25% increase in the cash rate, pricing will increase in 2023, albeit single digit. With expectations of interest rate cuts in 2024, pricing risk is to the upside.
On rentals…….
The rental market is in a perfect storm. There are a multitude of factors in the mix:
- A change in household makeup
- A surge in migration, unexpected or allowed for by the Government or market
- A lack of supply of housing, a result of bureaucratic planning processes that are broken, and have been broken for over a decade
- Construction industry plagued with supply chain issues, high building costs and businesses going broke, limiting new supply
- Unrealistic increases in Land Values pushed through by Government, have led to dramatic increases in statutory expenses, Council rates, water rates etc. Landlords are trying to recoup a portion of these increases via increased rents
- With inflation driving underlying holding and mortgage cost, owners are trying to partially recoup these via increased rents
- Investors are starting to sell out, further reducing the amount of stock on the market for rent
The result, vacancy rates have dropped to unprecedented levels. In Sydney, the vacancy rate is 1.7% after reaching a high of 4.3% in 2020. In considering the above bullet points the vacancy rate will remain low, if not drop further.
Under legislation in NSW residential rents can only be increased once over a 12 month period. Consequently, we recommend that Landlords carefully consider their position in the market and discuss rents with your agent.
Wills Property is here to assist you in terms of your property requirements. Whether you are selling or need an expert in asset/property manager call us today.
John Wills, FAPI JP
Principal,
WILLS PROPERTY
0467443838
