Real Property Value VS Current Pricing

The old saying of what is a property worth? “What someone is prepared to pay for it” may not exactly hold true in the current marketplace. What it’s worth may not be what a purchaser can borrower at present. Let’s examine this in more detail today.

At present we have tighter lending criteria placed on borrowers via APRA, RBA & the self-imposed criteria by the lenders themselves. Although the question is for how long? Did these restrictions go too far at a time when the Melbourne/Sydney boom was virtually completed, most are now saying yes!  Should we “Making Hay” while the sun shines on this opportunity, most definitely. Lending has commenced easing and appears to have some more room to move, along with the next RBA move now be touted as a reduction by a quarter basis point (0.25%) being most likely.

There are key proviso’s being able to proceed with confidence; Price Range Activity, Capacity, Research and Analysis, verifying against as close to 100% of sales as possible and Negotiate very well to buy on your terms. As we know a lesser number of buyers can borrow the same funds that they previously could, but that’s not true at all price points.

A buyers’ analysis and understanding of the market can now be the difference of amazing success or over paying for a property. The price range of a property is often the key. The higher it’s priced, the fewer the people with capacity to purchase the given property. If it is under $800,000 then the activity level is still strong from First Home Buyers, Upgraders, Down Sizers, Investors and Relocators. Under this figure the market is very active and much more solid and even boasts many growth locations. If we move to a higher price range the lesser number of buyers commences to have effect of longer time on market and price. This trigger point will vary across the different parts of Australia, but the same mechanisms are proving true. Time on markets are pushing out in number of days but it will be the quality of the property, it’s marketing and agent that will now see the difference in the sales figures.

One key aspect to the tighter lending is meaning a much lesser number of properties are being built even though the demand for housing remains incredibly strong. This will no doubt see a housing shortage, rents increase, property yields will increase and a cycle of property growth recommences more broadly.    

In 2019, if property buyers get it right, there is great value buying and you’re buying power will be shown as soon as the lending criteria adjust back to be easier to obtain funds. That’s when people will be say “If only I had bought then”.