Despite predictions of woe (and we have had a lot of those over the past 3 years), pricing in our market has remained stable for the most part over the past 12 months, with minor changes more typical of quarterly movement and the odd exceptional result in tightly held or sought after areas. With money so much more expensive (compared to 18 months ago) and with the heat of our COVID driven southern neighbours cooled though, how is this still the case?
Supply is the name of the game here, and while we don’t have the same number of buyers eager to take property off the shelves, there is still so little available (compared to pre-covid), that even with reduced demand (and fewer buyers flush with cash) that tight supply is keeping pricing strong.
Why is supply so tight, you might ask. After all, with the residual building activity from the various government grants there should still be more property coming on and surely enough to go round.
Firstly, even with the boost to new construction, we are still way off what are practical needs are for new homes here in Cairns (and certainly well down compared to pre-GFC when unit development made up a large part of our housing mix). With rental vacancy rates below 1% for over a year now, homes can’t be built fast enough for those that NEED then, let alone those that want them.
Second, where in 2021 you could readily make the jump from a $500,000 home to a $700,000 home with interest rates at circa 2%, that mobility has changed significantly, with banks now assessing those same homeowners with a far stricter eye and opportunities to upgrade without a significant cost harder to come by. Fewer people upgrading, means fewer properties on the market further down the chain.
Potentially the greatest hold on supply at the moment though lies with the record numbers of home owners that took out fixed rate mortgages over 2020 and 2021. For those lucky (or prescient) enough to lock in a rate with a 2 or even a 1 in front of it before the suite of rate rises, there is some pretty serious incentive to hold tight while you can, lest they find themselves facing a 5 or even 6 next time they sit in front of their lender.
Getting the price right still remains important on both sides of the equation though, so as always, do your homework, talk to an expert and happy real-estating.