A Positive Approach
So, Happy New year! For most for us this means a welcome back to work, and hopefully this is not too bad an experience as you all had a recharging break. I did, managing a great balance of a little work and a little play, I also took some time to relax and reflect on the past year. For the Home Building and Design industry, which much of my work centres around, 2018 was quite a year, starting with the housing market at its highest and then throughout the year we were left with many questions, among those a very serious one: is the housing market dead?
Well, whilst I am NOT an economist my personal opinion is: NOT DEAD! Slower maybe, but definitely Alive! Owning the Australian dream of your own home, is still on top of most Australians' wish list, and the market will continue its course to satisfy this need. Despite the slowing down in both buying frenzy and pricing, new houses will still be built and existing homes renovated, sold & bought. So, let's consider where the market is heading in 2019.
This great mural is by artist Fintan Magee in Newtown/Enmore NSW
The market is definitely adjusting, on all accounts back to reality, and that's the first bit of good news. The pricing of homes is quickly going back to where some economists say it should be, with prices is most capitals particularly the largest being Sydney and Melbourne, returning to 2016 figures - and if we are all truly honest, this needed to happen with the removal of foreign purchasers and too-easy bank loans which were exploited by investors and the banks, the bolting horse did need to calm down. I believe now is the time to stay positive!
The purchasing frenzy has gone. This is a good thing for many, especially for those wanting to buy their own home, as they can now take their time to think about it and choose the property they prefer and make offers suited to their budget, rather than rushing into loans which although approved, were in reality difficult to maintain.
The next bit of the good news is that those buying and selling within the same market are not particularly affected by value ups or downs in any market. The truth is that prices have not, and usually do not drop over-night, meaning that if you loose some profit on the home you are presently selling, you’ll usually get that money back in savings on the property you will be looking to buy; it is very likely that these people will not need to add any more debt to an existing mortgage.
Differently from the market troubles of the mid to late 1980s, the interest rates don't seem to be escalating, which is certainly good news for those that have an existing mortgage, OR for those who have taken advantage of the easily accessible lending of the past few years, resulting in one or more substantial mortgages. With interest rates so low it’s important for all of us to remember where interest rates were, even into the early to mid-nineties! I remember buying my first home in 1994 with an interest rate of 13%, admittedly the house price was low, BUT it was still a crazy amount of debt for me at that time. This also means that those not happy with a lower value of their homes, can afford to stay put without suffering mortgage repayment stress.
It is harder to get a mortgage, yes, as banks are finally more scrupulous about lending out money, and until the final results of the Banking Royal Commission are released, the availability of lending doesn’t seem to be changing too quickly. Although much of our economy is reliant upon the building and real-estate industry, is this really such bad news? Not necessarily, as easily available money might support the wrong impression that a huge debt is the normal way to go. Australians presently hold the title of the 'largest homes in the Western World', and we should question IF bigger is really better. On top of this we now also hold the title for some of the highest per-capita personal debt figures in the world, with 29% of Australian households over indebted! Think about this for a minute, as it’s a pretty amazing figure: this means many are heavily over committed, and probably not able to service their debt! Of course what sized home one thinks appropriate and what sized debt one feels comfortable with is personal, and certainly varies from family to family being a personal decision.
Ultimately, this is an easier time for purchasers to get into the market, and as it's apparent that vendors need to adjust to the present market, it’s also important now more than ever, to ensure your property looks the very best it can, ensuring you get the best price possible, by enticing purchasers to buy your property, rather than it sitting on