As Australia continues to experience waves of growth in the property market quarter after quarter, there are finally signs of market fatigue with the rate of growth plateauing and showing sluggishness. With an inevitable rate hikes on the horizon, is it finally time for real estate to cool off?
2021 is projected to cement one of the most incredible percentage gains in all capital cities including Melbourne and Sydney, which record significant double-digit growth before a forecasted retreat to a modest single-digit growths in 2023, onwards into a slow decline. This is due to a range of factors, including over-extension, tightening in lending and projected interest-rate hikes. By 2026-2028, data suggests a wider market correction in line with the macro 18.6-year property cycle. With this forecast and probability in hand, how does one factor in the bigger decisions to either buy, sell or renovate?
Home Owners / Owner Occupiers
If you are occupying your own home and wondering whether to go to market or keep your property, it is worthy to note that unless you are looking at renting or have a spare property to go onto, there is little point. Current market means any home is likely to yield an attractive price, however the acquisition process will be equally expensive, meaning you are essentially back to square one. For renovations, it is a tricky landscape to navigate right at this moment as there is a blanket shortage of raw materials and labour. It is important to speak to trusted contractors and companies to weigh up the pros and cons of actioning any considerable renovations at this time. Is it urgent? Can it wait and be scheduled for later in 2022 when supply chain congestion may ease?
Investments
For real estate investments, the considerations are drastically different. Timing the market becomes a priority in order to maximise capital and gains. Renovations are non-negotiable and properties should be listed whilst the market demand is soaring. As it is a logistical nightmare to action and schedule any renovation or construction work currently, investors should plan well in advance if they want any significant piece(s) of work done.
There is a growing myth and motivation by many investors to try and catch the absolute top of the market, but the reality is it is nearly an impossible task. Instead, one should focus on a sensible strategy to enter and exit the market, planned well in advance, taking into account the market dynamics that are in play such as lockdowns, supply chain issues and shortage in labour.