Almost every month of 2004 saw the dynamics of the property market change in some form or other. The property market has been under the microscope all year and many of the changes have been unwelcome ones. However, for others, the adjustments in Sydney’s marketplace are seen as way overdue and a deserved relief. Regardless of whether you are buying or selling, the cyclical downturn is here to stay and it’s time to face the music.
Shocks to the system have included the introduction of new stamp duties and taxes, the lowest auction clearance rates in 15 years and the federal election. These factors alone only added insult to injury along with the continuing slide in property prices.
Investors who previously looked at property for a quick capital gain have fled, and without active investors there is less competition. Now those who are buying can take their time looking as the sense of urgency has dissipated from the marketplace.
This has also impacted on the rental market. Without lots of investors, there are fewer rental properties available. There are approximately one-third fewer rental properties for tenancy now than around the same time last year. Those investors who remain in the playing field are re-evaluating their options. They realise that long-term capital gain is where the market is at and are no longer buying any property that just happens to come along.
It’s been a year of rate rise speculation. Each month there was a different spin on when we might expect a rise in interest rates, and it continues. It’s important to keep what’s happening in perspective. A boom market cannot last forever and many analysts will agree that the current downturn is probably about two years overdue. With an economy that many refer to as bullish and unprecedented employment growth, a rise in rates will be in accordance with our continuing economic strength and stability.
Towards the end of 2003, there was still an over-inflation of prices in the Sydney region. Moving into 2004 the market began to suffer and it was in May that the harsh reality hit hardest. Steadily the prices began to adjust. Terms such as crash or falling only create unnecessary panic. We are seeing a correction on what was previously an unsustainable economy.
Interestingly, it has taken a year of realisation and awakening for many to realise the actualities of a post-boom era. Throughout the year, vendors have been clinging onto unrealistic beliefs in relation to their property price tags. It’s now a fact that if you are not prepared to meet the market, the savvy and fastidious home-seekers just won’t buy it.
The market will go into shutdown mode over Christmas and January is traditionally very quiet. However, the current adjustment is more than likely to persist as we carry over to 2005. Most of Sydney has experienced a price adjustment but there are some areas that have lingered right through to the last moment, and are only now beginning to recalculate their marketplace values. Sellers especially will need a pragmatic approach in the New Year. If not, sales will not be accomplished and they may have to contemplate renting their property out, until the market levels out completely. At least this will assist a lack of available rental properties in the short-term.
There are winners though and they are plentiful. The greatest benefit from this market reform has been for the first homebuyer, as well as those who are wishing to upgrade. It is definitely a buyer’s market; however, it is also a good time to sell. What you sell next year should be relative to the property you may want to buy. Consider the area you are selling in and what you want to purchase. As long as it has adjusted respectively to your own suburb, you will do well.
The roller coaster ride of 2004 will continue into the New Year. There will be fewer sharp drops and it will eventually level out. We will see a property market that is realistic, affordable and a lot more stable. We are not experiencing depreciation, but more an appreciation of what is now available that for many has been unobtainable in the years gone by.
Garry Rogl is senior property consultant with estate agents Planet Properties of Petersham.