It was just over a year ago that interest rates rose for the first time in more than a decade, ending a boom in property prices that was nearing the fastest pace in history.
Rising interest rates amid a rapidly rising cost of living triggered a collapse in consumer sentiment, which led to a significant slowdown in demand for property purchases.
That dampened demand and pushed home prices down as eight consecutive interest rate hikes made buyers less able to borrow. This year things changed again.
Four more rate hikes, all else being equal, should mean lower prices, but we’ve seen the opposite. Home prices are falling short of expectations Steadily rising every month this year.
In a further sign that sales conditions are improving, auction sales have consistently exceeded levels seen in the second half of last year in recent months.
However, despite all this, sentiment to sell remains low.
New Survey Reveals Changing Attitudes
The fact that people are hesitant to sell is evident in a longitudinal survey of property owners conducted by REA Group.
As of March 2022, 61% of property owners considering selling thought now was a good time to sell. By March 2023, this had dropped to just 33%.
Market vendor motivations have also changed. As of March 2022, high buyer demand was cited by 34% of sellers as the primary reason vendors thought it was the right time to sell, followed by high prices at the moment (31). %Met. Only 13% said “it fits my personal situation” as a primary reason for selling.
Buyer demand is still below the peak reached during the boom, but there are clear signs of recovery.Photo: Julian Andrews
A year later, these motivations were reversed, with “suitable for my personal situation” being the top reason for selling, with only 15 percent selling for “high buyer demand.” .
This shows that buyers’ perception of demand plays a role in how vendors choose to bring their properties to market. It also revealed that declining seller sentiment was one of the factors contributing to the decline in real estate for sale.
There were 19 per cent fewer properties for sale across Australia’s big cities in May this year compared to last year. Ironically, this reduced supply of real estate for sale has contributed to the improved sales conditions that have emerged this year.
Buyer demand is still well below the peak levels seen at the height of the boom, but there are clear signs of recovery in recent months.
The total number of unique visitors looking to buy real estate on realestate.com.au has increased, which has led to an increase in inquiries. However, limited inventory of properties for sale remains a major challenge for buyers.
But once it becomes clear that interest rates have peaked, market sentiment is likely to improve. This will help restore trust between buyers and sellers and can potentially lead to a very busy spring.