The Real Estate Supply vs. Demand Disparity is Getting Stronger

Hallelujah! Interest Rate Reprieve

The 10 month run of interest rate rises has finally come to an end and interestingly so have the consistent month on month drops in median price in Brisbane come to an end with Core Logic reporting a 0.1% gain in March. It might not sound massive but it certainly is far better than the alternative and decided cause for increased positivity.

The Demand / Supply Mismatch is Getting Stronger …

Ironically though one is not the cause of the other. You remember I made the comment in my last 2 newsletters that new listings were dropping and it was the demand / supply mismatch that was a key contributor to price growth during the Covid boom? Well, that argument has definitely gained momentum in the last month. Core Logic reports that new listings for Brisbane are down almost 20% versus 12 months ago and 17.8% below the 5 year average. While my team are looking forward to a very busy April and May with new listings, Core Logic also suggests that listings for the next quarter are also expected to continue at a lower level with agents requesting 14.9% fewer real estate reports than this time last year. Sure, that is not an entirely accurate barometer of upcoming stock levels but it certainly gives us a reasonable picture of the near future.

Auction Clearance Rates Continue to Improve

Auction clearance rates are another source of positive sentiment with the highest clearance rates recorded in the last weeks of March since April 2022. Brisbane in particular recorded a clearance rate of 64.2% for the week ending 1st April while Ray White, with its reputation as being auction experts, recorded a staggering clearance rate of 73.3% and an average 5.6 registered bidders. CLICK on the images below to get a more in-depth overview of Ray White's recent experience with auctions.

Equally, while these figures are not measurable, my personal feeling is that number of offers made per property is increasing and the number of buyers reaching out to enquire about upcoming properties is definitely getting stronger. Better still, and something that Ray White can measure, is that buyers to open houses (measured by the numbers that we register on our iPads when they arrive) is up by 10% YOY … did I mention a growing demand/supply mismatch already?

Are We Going to Fall Off a Mortgage Cliff?

Sure some elements of the media may want to continue flogging the idea that some 800,000 fixed mortgages are set to come to an end this year meaning a further increase in mortgage stress for many but from where I am standing at least this hasn’t resulted in a massive increase in financial distress sales. If there has been a high percentage of mortgage holders with a savings buffer to help them withstand the increase in rates so far then logic would suggest those with fixed mortgages will be equally if not more prepared to withstand the stress to come. Feel sorry for your average mortgage broker, they are about to get inundated with requests to refinance! If you haven’t been in touch with yours already on that score, I strongly recommend it. Rates may be up but there are definitely savings that you will be missing out on.

Buffers & Contingency Plans …

But speaking of buffers, there are many starting to argue that the 3% serviceability buffer applied to new home loan applications should be reduced. This of course would increase the amount buyers could be pre-approved for. As much as this would further buoy the market and potentially increase prices, after seeing interest rates soar well past the serviceability buffer in the last 10 months, I would suggest that continued caution would be a far better approach.

Personally, when we are dealing in such large sums of money, caution should always be deferred to. Yes, I am presently quietly optimistic about the future of our local market but I never bought into all the doom and gloom of the last 12 months in the first place.

For all those buyers that have told me they were waiting until the middle of 2023 to buy because they thought prices would drop like a stone, I think now might be the time to reconsider your plans. Sure, things can change again but the future is so unknown that perhaps a better course of action is just to build in your own contingency and serviceability buffer just in case things go pear shaped … you know that common say, prepare for the worst but hope for the best.