According to Wikipedia “tumbleweed is a dry, bushy plant that breaks away from its roots upon dying and is rolled along the ground by the wind. It is most famous for its use in Western movies to visually symbolise emptiness, desolation, or a deserted area”. They may now update this definition to include the state of the current Australian property market.
Let’s be real, before the budget was announced the market was already starting to blow some black smoke. I know it’s tedious to recite the economic headwinds that were in play but global inflation, rate rises, wars of questionable choice and a cheap lending hangover from COVID already had things feeling a tad dicey.
Then, the proverbial rocket-propelled grenade (the budget) scored a direct hit and the market has since been sent into more than just a little tailspin.
As you would expect we monitor and report buyer enquiry levels as part of our deliverables to clients and the data is clear…buyer enquiry levels across most categories have recently dipped by more than 50%…and in some price points even more.
Now…as you can tell, I love a bit of dramatic language to tell a good story so I’ll sprinkle a little comfort in here by saying I do think this will wash out but it’s probably going to take a while.
If events like COVID and the GFC taught us anything it’s that the property market has a habit of standing up, raising its gloves and soldiering on but it’s the combination of so many factors all at once that I think has this market feeling so uncertain.
On top of this the punters have also been trying to download and understand what impact the zoning changes will have on certain areas and of course property values. You would be forgiven for thinking that the Federal Government’s move against investors combined with the State Government’s recent aggressive zoning changes may conceivably lead to a real estate crash that we didn’t have to have. I mean with all of this new supply coming down the line the market is going to be overfed right? The Labor thinktank are probably thinking they have cracked the code…
Not so fast.
Developers are taking note and many of these new proposed projects are starting to fall over, of course they are. Why would they want to build the new supply if the market isn’t going to absorb it? Lending is expensive and building costs are still rising. My gut feeling is that the government needs to think a little harder on how to resolve this housing crisis because weakening the market and development ambition at the same time won’t resolve anything at all. Who might win in this scenario? My guess is the existing landlords as rent presumably continues to rise.
Speaking of winners, now that the only tax-efficient capital-gains-free investment vehicle left is the family home is it possible that less now will want to sell? Are existing home owners now more incentivised to capitalise on what they already own to add tax-free value, which ironically will make these homes more expensive?
So many questions, so few answers. I’ve always tried to write this newsletter posing a question and then landing on possible resolutions but I’m just a little uncertain…irony intended.
And yes, I’m also aware that it’s possible that I’m just ranting from the ivory tower…
Until next week,
David Murphy