How quickly market sentiment can change. Last week I reported that many economists had revised their predictions as to when the next rate cut would occur, with many now saying it will be at best, much later this year and some predicting next year before rates start to come down, albeit very slowly.
Since reporting last week, there have been a few economist stating rates may need to go up, so many mixed messages. However, buyers appear to be buying into it, as in the past week we have noticed a drop in buyer enquiry, particularly with properties that would be characterised as C class locations. It appears buyers may be worried that rates will not drop soon and with some chatter around rate increases, it spooks many.
Prior to this, all the talk was about rate cuts, so buyers still had some FOMO and were out in droves. It is amazing how quickly a market can change and this is how many get caught out. For sellers in the market at the moment, there may be a need for a rethink or adjustment in terms of price expectation if they need to sell now. This could, however, just be a blip and we need to wait and see what the RBA does next week and what their comments are, however I sense it will just be an each way bet, the commentary will revolve around “sticky inflation” and the need to keep it under control.
Households are doing it tough and any rate rise will certainly drive the economy south, so it’s a fine line everyone is treading. The May budget will certainly be interesting as it cannot risk be inflationary, but we have a Government under pressure to assist households and let’s not forget the tax cuts on 1 July.
We are certainly not going to see rate cuts this year unless fresh data points in a different direction and there is more confidence around inflation dropping. So I think moving forward, pricing for houses will moderate, despite what is being reported at the moment, which is, house prices grew across the first 4 months of this year. If rates are held for an extended period, the market will forget talk about rate increases and we will return to normal transmission – we all suffer short term memories.
However, at the moment, we are witnessing some anecdotal evidence of buyer reluctance to engage or pay a premium price on slightly inferior properties, where as not so long ago this was not the case. Therefore, my advice is, if purchasing a property and you need to sell first, sell before buying, the pressure, risk and disappointment is not worth it.
Talking of house prices, I was thinking about this the other morning. The number one question we are asked as agents is, “what’s my property worth”. It’s a reasonable question; hey we are real estate agents, it’s our job to know, right? Well to some extent, yes it is our job to know, but here’s the rub, pricing can change quickly and in line sentiment, as I have just explained it can change and turn on a dime.
Unlike the stock market, house prices and movements are not published in real time or on a day to day basis. Much of the data we get is either 1, 2 or 3 month old. In some markets and property segments, pricing can change monthly. Take for example apartments, at the moment pricing is changing on a monthly basis. What an apartment sold for last month is nearly irrelevant today. So how is it that an agent can, with 100% assurance, price a property.
Instead, I always say we need to control what we can control and focus on the “3P’s” that will actually produce the best result, Preparation, Presentation and Promotion. We know styling a property will generate more engagement online and hence more buyers coming through the door. Painting, gardening and repairs will make the property look better and promoting/marketing across various mediums casts a bigger net and pool of buyers.
It is still very surprising how many sellers still want to cut corners in these 3 areas, but still expect a premium price. They fail to appreciate the relationship between investment into their biggest asset as a means of extracting a premium price – and by premium price, I don’t mean their price, it’s the premium price in the market at that time.
Why do I mention this? Moving forward, if market conditions tighten up, it will be the prudent sellers who invest in these 3 areas who will win the race and achieve a great outcome. When a market is running hot, you can sometimes get away with a short cut, although it should not matter, but with a softening market, it’s a non-negotiable.
Ray White just released it first Prestige Property marketing report magazine, here is a link if you are interested in reading it. https://viewer.joomag.com/luxury-report-edition-one/0725869001713913318?short&
Until next week, enjoy the long weekend if you are in Queensland, stay safe and be kind