When will prices drop – be prepared they might not.
The question I keep hearing, and fairly too – is when will prices come down? Whether its an owner anxious about maintaining the growth their property has seen over the past 3 years or a hopeful first home buyer wishing for the clock (and prices) to wind back, it’s a question that has repercussions for virtually everyone.
Against predictions of wild swings of 10%, 20% or even the 25%+ drops that were raised and swung around at the beginning of COVID, our market has only strengthened since 2020, with even the past 12 months of rate rises (after rate rises, after rate rises) seeing local prices remain steady or even continue to increase in certain sectors.
Cheap access to money, a new focus on time spent at home and the fact you couldn’t spend money going anywhere else were early fuel to the fire, and skyrocketing costs of construction has continued to support higher prices as the cost of replacement for existing stock has become increasingly unaffordable and already tight supply has gotten tighter with the prospect of readily built, affordable new housing has become that much harder to make reality.
There is no doubt there are fewer buyers with big budgets than there was 2 years ago. But there are even fewer homes for them to buy today and the balance of buyers vs sellers is still keeping things weighted towards the latter in most cases (if a little more balanced than what it was). The “silly money” that was floating around and throwing offers hundreds of thousands of dollars above expected values though does seem to have dried up – probably for the better in the long term, though I am sure there were a few lucky sellers that are very grateful it was there when it was.
Its worth noting though that continued strength here locally does not mean it’s the same case everywhere else. Cairns had tight housing supply pre-COVID, with little to no medium or high density development and constrained land stocks. Add to that an influx of lifestyle buyers and a recovering tourism industry and there is plenty to keep things running. Contrast that with areas that have traditionally had an oversupply, or where prices have departed the realms of affordability and higher interest rates are a headwind that is becoming very hard to sail against.
So when will prices drop? Well, not today, unlikely tomorrow, maybe later (but unlikely) but don’t expect to see the Post-GFC crashes. And for most people, that’s a good thing.