Is the window of opportunity closing?

It’s been an interesting week in property as we see some of our predicted outcomes begin to manifest.

I agree that property markets are driven by multiple influences, but there’s little doubt interest rate movements are primary stimuli.

This month, the RBA chose to pause on their program of consecutive rate rises. Our team at Locate think this was a smart move. Annual inflation had fallen for three months in a row. In addition, there are other tensions playing out in the economy, so continued rate increases threatened an overshoot that could have plunged Australia into recession.

So, how has this pause been interpreted by property buyers and sellers?

The pause effect

Most people now believe interest rate increases are either at or near their peak.

While there’s every chance we’re in for another one or two increases over the next six months, most economists agree the end is in sight.

A recent article in the Australian Financial Review titled “Major city house prices ‘have hit bottom, upswing on the way’” is garnering a lot of interest among my networks. While it does focus on Sydney and Melbourne, much of what’s said applies to Brisbane as well.

Image source: AFR

This stop to rises is boosting the buyer psyche – that’s exactly what we’re seeing at ground level at least.

First and foremost, it’s about certainty. While there remained the chance of continued rate rises, it was hard for loan applicants to know what amount they could afford to borrow from a lender. There’s nothing scarier than stretching yourself to secure a loan and then seeing repayments ratchet up each month due to interest rate increases.

Property is also a sector driven by collective confidence. When purchasers see property prices stalling or even retracting, while other buyers act cautiously, it’s difficult to convince yourself that the market won’t continue to drop forever.

It’s a bit of a self-fulfilling prophecy though. The market softens because everyone is convinced it will soften. The inverse happens during a boom.

The interesting aspect here is that fortunes have been made by people who can see the big picture and spot countercyclical opportunities. The greatest exponent (and probably most quoted financial whiz) is Warren Buffet who famously said it’s wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”

Property market stakeholders across the country have been fearful since the first rate rise in May 2022. That fear set in and it led to less transactions, with those that did trade being sold for relatively modest prices compared to the 2021 boom.

But the April interest rate rise pause has turned sentiment around. Buyers and sellers can see light at the end of the tunnel, and that an ultimate cash rate of somewhere between 3.6 and 4.1 per cent isn’t all that scary. Sure, they’ll need to adjust their buying budget from a year ago to ensure they can borrow adequate funds and comfortably service their loan, but buyers now know their limits.

What we’re seeing

The stats are showing a mild uptick too. Brisbane recorded an increase in property prices for the first time since early 2022. That said, it will be a while before we see the full impact of rate pauses play out in prices and sale transactions.

For us, a lead indicator is the level of buyer enquiry we receive. Without delving too much into our numbers, I can confirm the phones are ringing hot and we did work through the Easter break. If these contacts convert to purchases, April will prove one of our most successful months in recent years.

Another beacon of strength is the numbers at open home inspections. While Aussies always have a fascination for what their neighbour’s house looks like, I get the feeling there are fewer “tyre kickers” and more genuine buyers giving serious consideration to purchasing.

Of course, picking the bottom of your property market is challenging. What I would say is that those who act now can still purchase competitively, but the window of opportunity is closing. Hesitate and you may well look back on April 2023 as the prime time to have purchased your home.