The signs are looking good for the real estate market, finally!
House prices nationwide on average were flat in March and April but actually recovered 11% in April after adjusting for seasonal factors. Net migration inflows have boomed from a loss of 19,000 people in the year to March 2022 to a record gain, just over 65,000 this past year to March excluding the initial effect of the pandemic in 2020.
More people means more demand initially for rental accommodation and down the track as availability worsens, we can expect more people will be encouraged to advance their plans for becoming owner occupiers. Many more first home buyers are in the market, though investors still remain few and far between. This is very important because of a key thing. For two years now buyers have been stepping back from the market. Initially they were waiting for the frenzy to end and the supply of properties to improve. Then they were waiting for prices to stop falling.
At some stage this large queue of buyers will be activated and the factors likely to do so are appearing and growing in strength. As noted, net migration is soaring. Listings are also falling. There is increasing media attention on the now falling house construction, and group home builders are reporting a very strong withdrawal of demand for off the plan units.
On May 23 the Reserve Bank raised their official cash rate by 0.25% to 5.5%. But they signalled that they do not believe they will need to make further increases and anticipate easing monetary policy late in 2024. The chances are they will cut rates well before then, but that is not the key issue for the moment and there remains very large uncertainty about how inflation will track in the next few quarters.
For borrowers it seems much too optimistic to think that mortgage rates will decline by any appreciable amount by the end of the year. But some declines are likely as banks compete for business. In that regard we look forward to the traditional bank Spring specials this year once September comes along. Until then, Winter will provide some still good buying opportunities for home seekers, keeping in mind that investors are still very thin on the ground because of their worsening tax obligations.