Followers and readers would know my wife and I put our property up on the market back in August of 2022. If you missed my blog post the auction, you can read it here.
This weekend gone we went at it again. I got it totally wrong in 2022. We had our first rate rise in May of 2022. And between May and August of 2022, we had four rate hikes. My point of view at the time was that there was just no stock on the market and that this in and of itself would drive prices higher, notwithstanding rising rates. How wrong I was.
What a contrast the weekend was when compared to almost 12 months ago. From good numbers during the campaign to excellent numbers. From low ballers pre auction to a handful of semi-serious offers. From just a handful of people attending the auction in 2022, to almost 100 people blocking off the street over the weekend. We had 5 active bidders during the auction, and after 30 minutes we sold for what we thought the property was worth.
What's changed since August of 2022? Interest rates in August of 2022 were 1.85%. Today, they are at 4.10%. What were buyers looking for in August of 2022? What were they waiting for? What were they expecting?
In August of 2022 vendors were selling in the face of rising rates or selling in fear of prices falling further. Buyers were holding out doing the same, anticipating further declines. This ladies and gentlemen is fear and greed at its finest.
Right now we're seeing the number of homes been taken to auction doubling to 1,951 from last week's long weekend. We are seeing a jump in average number of bidders at auctions from 3 to 4.5, and national clearance rates are sitting at 72%.
I decided to take a look at what is driving this market and how it compares to August of 2022. Please read my previous blog here, so that the charts below make a lot more sense.
In August we saw one of the largest one month drop in prices since 1982. Today, we're seeing one of the largest one-month gains.
Lending, after falling off a cliff has resurrected from the dead, helping drive property prices. Having said this, it's hard to see on the chart below, but there is a very faint sharp decline in the green line using that latest data indicating that lending may have peaked and is falling again.
Building approvals are looking a little confused. After rising from their August lows, they've hit a double dip decline - although making higher lows. Higher rates and higher cost of construction is deterring projects being submitted for approval.
In my last blog, the stock market appeared to have bounced, indicating property prices may be ready to turn. We're now seeing the stock market take a breather. Having said this, we could see property prices continue to climb in the coming months before it too takes a breather.
And here's what I thinks is the game changer over and above what I have gone through already. Migration. We are seeing a flood of migrants coming into the country, with Australia on track for a 2023 migration boom of 400,000, its dwarfing the previous forecast of 235,000.
And here's what it means for property. Simply put, we do not have enough stock. And with building approvals in the doldrums, simple supply/demand economics are in full swing ladies and gentlemen.
And that's another item ticked off the Baharian financial plan as we continue to venture forward. I don't know what the property market will do next week or next month. The data tell me that we'll probably see prices continue to go up from here. You might be wondering how this is possible with the rate hikes we've been seeing in the market. What you need to understand is that history tells us that markets don't crash, and we don't have recessions during rate hike cycles. They happen after rates have peaked. Have rates peaked? Maybe, who knows. All I know is that developing a robust game plan trumps a robust opinion any day of the week.