What is Driving This Current Property Boom? March Market Update
Written by: Rich Harvey, CEO & Founder
You’d have to be blind Freddy not to realise that the property market is in a new state of frenzy at the moment. My team of buyers’ agents are witnessing an extraordinary turn around in demand compared to the same time last year. Wind back the clock just 12 months to the end of February 2020 and we were heading into the first major negative headlines of the economic shock waves that COVID-19 was bringing to the property market including predictions of up to 30% property price falls.
Well, the pendulum has swung fully back the other way and we are now likely to be looking at price rises of at least 10% this year and a further 10% rise next year as the market is fueled by incredibly cheap money. In fact, prices have already jumped 10% in some suburbs compared to November 2020. What was selling for $2m is now $2.2m or more!
At open houses we are witnessing long queues to get in the front door, as everyone needs to check-in and sanitise and is desperate to get first dibs on new listings to the market.
At auctions we are witnessing registrations of 20 or more bidders, which in my career as a buyers’ agent over the last 20 years, is unprecedented. Auction clearance rates are back to boom levels and were 90% in Sydney and 82% in Melbourne last weekend.
Even in private treaty negotiations, we are witnessing very aggressive buying behaviour as buyers are scrambling over each other to make offers on a very limited pool of listings and making offers after the first open house.
What is driving this market and are these drivers going to continue long term?
One of the big differences in this property boom is that it is primarily driven by owner occupier home buyers rather than investors. In previous booms investors have been the ones speculating in bricks and mortar and have created an unsustainable rate of growth.
This latest boom is driven by a confluence of factors including rock bottom interest rates, creating greater lending capacity, pent up demand coming out of covid as buyers seek improved home office space, upgraded homes and buyers accelerating their dream of living in a lifestyle location without having to commute.
Another interesting factor with this current property boom is that it is set against a backdrop of international borders being closed, very low population growth and virtually zero immigration. While there have been record numbers of expats returning home, not all of them are buying property!
The other factor driving this market is the low volume of overall property listings in high demand and premium suburbs. Many potential vendors that would like to sell their property are holding back at the moment for fear of being either priced out of the market, or not having another property to move into. This scenario is where we as buyer’s agents can help bridge the gap as we have access to a very large number of off market opportunities through our networks.
How should you as a potential buyer navigate this market?
The first thing to realise is that property prices are back to the peak 2017 levels. As the boom continues, we will start to see new records set on a weekly/ monthly basis which means new precedents are set within each suburb. These new precedents mean a reset of median prices for virtually every suburb during a boom time market. It often takes buyers a considerable time to understand the dynamic of a local market and by that time they may have missed the boat or risk being priced out of an area they had their hearts set on.
I recommend not adopting a FOMO attitude but instead continue the search for the ideal property and set your limit at auction that is within your affordable range.
I'm regularly asked if due to this crazy market it would be a better idea to just sit on the sidelines for a while to wait and see what happens? My reply is simply this - sure you're welcome to take a break from property searching, but if you wait another six months, expect to pay another 10% more. My recommendation is to buy sooner rather than later, but only if the property fits what you need long term.
It's really tough out there, and it's a frustrating and stressful ride. If you'd like a leg up and someone supporting you at each stage of the buying process, then please reach out and speak to my friendly team of buyers’ agents who would be delighted to help you.