The truth from the factory floor.
It has been a very busy month and a half at Integrity Real Estate. Although stock volume was very high at the turn of the financial year June 30, the month of July would determine whether or not sales results would stand up against the barrage of media advertising touting a “market softening”. Without holding you in suspense, the answer is: sales maintained strong.
Majority of clearances in the month of July and into August were properties on small acreage in excess of $800k and $900k. This bodes very well for the local market, as it shows that (as predicted) the Kinglake Ranges remains mostly immune to a market relapse that is occurring in suburbs reliant upon the once-almighty Auction. But this comes with a condition.
The Reserve Bank of Australia (RBA) recently decided to keep the official cash rate on hold at the record low setting of 1.50%. The RBA determined that global and domestic economies remained positive and were generally remaining buoyant. On a domestic front, growth in employment continues with businesses performing well across the board. Yet, although consumer sentiment remains healthy, household income growth is weak and inflation is disappointing the RBA’s expectations, and this is where the property market is held hostage.
The condition on these strong results is that vendors should not make the mistake of thinking this is the start of 2017, where a vendor could ask a premium price and almost be guaranteed its achievement. There has not been any market softening in the Kinglake Ranges, but the market has settled. This is to say that property values are now well-established. A lot of people, buyers and vendors alike, often say to us, “I hear prices are going crazy up there.” This has its good and bad connotations. As previously reported, even if the market experienced a 10% reduction in its price averages, the results in sales would still be far and above what was achieved 1, 2, and 3 years ago. Domain.com reported recently that prices had returned to a 2016 level, which is a gross misrepresentation of areas like the Kinglake Ranges. We are still leagues in front. But the only way a market “correction” is defended against is by smart pricing and marketing. We are still, in large part, beholden to the buyer. We may remain largely immune, but our performance is still relative to everywhere else.
It is this uncertainty that has made the RBA keep rates at a standstill, as they do not wish to rock the boat. This is good news for home buyers and investors who may have been afraid of an unexpected rise in interest rates—after all, mortgage-phobia has contributed to a downturn in buyer confidence. This was antagonised by a tightening of lending policy (especially following the notorious Royal Commission) that made it more difficult (and time-costly) to secure a loan.
If they are smart, vendors would capitalise on the perception that property prices are “stabilising” as well as the belief in buyers that a record low cash rate means interest rates will not move. While interest rates are low, it is our advice to sell, sell, sell. This will not be the case for very long. But buyers looking to take advantage of good conditions will want to buy imminently and fix mortgages while they can.
Some of you may be saying—Rob, speak plain English. So, in summary, interest rates remain low, meaning that many buyers are still looking to get into the property market. But there is still a weakness in buyer confidence due to the strictness of some lenders among other reasons, which means that vendors need to be strategic with how they market their properties. But, by and large, vendors should not believe what they hear in mainstream media reports, Facebook ads, or 7 news bulletins. The market is still strong.
On another note, I would like to take a minute to talk about small business and youth in business in our Shire. Murrindindi Shire is home to about 1,500 sole traders and small businesses, which in a Shire of our size is a pretty big piece. At Integrity Real Estate, we are proud to say that 50% of our staff are aged under 30. Integrity is not afraid of hiring local and hiring young as a balance of youth and experience renders great results for our clients. Furthermore, we are proud to be a family-owned small business who puts its money where its mouth is. We live local, buy local, and work local. We believe that this is the only way to deliver a truly personalised and excellent service to our clients, and it is at the heart of philosophy. If you would like to learn more about what we do or have a chat about what the market is doing, our door is always open next to the United petrol station across the road from the post office.
Call us any time on 5786 2033.
