As I am sure you are aware, it is responsibility of the RBA to set the interest rates in this country. Historically, the RBA has used interest rate rises as a tool to control inflation.
As inflation has been significant over the past 24 month, it is understandable that the RBA has begun to ‘pull the lever’. The question is, have they got it right this time around? I would argue no, but again, it is just my opinion. Firstly the set of circumstances that lead to the inflation were very unique, most notably Covid, associated supply chain issues and then significant government intervention and stimulus. This was not a typical economic cycle and traditional interventions are therefore not necessarily the answer. They (the RBA) appear to have been ‘late to the party’ and are now being far too aggressive, not allowing enough passage of time for the lagging statistics to evidence the already felt implications of the previous rate hikes. In any case, the train has left the station, and there is not much we can do but enjoy the ride.
A recent ANZ forecast is predicting a decline of 17% in values across SA in 2023. I am more optimistic and suggest that a value decline in the order of 7.5% to 10% is more probable.
So, what does it all mean for the Adelaide property market, which is historically less volatile than many other Australian capital cities? Whilst the latest statistics from RPdata paint a relatively good picture for South Australia, having only a nominal decline in median values of 2%, compared to interstate declines in the range of 5% and 20% over the same period, I would suggest a stronger market correction locally is now imminent.
Feedback from real estate agents over recent weeks has confirmed fewer purchasers at opens and less registered bidders at auctions. Furthermore, these purchasers have become more discerning and are generally making offers at or below asking prices. More generally properties that are overpriced or poorly presented are now requiring slightly longer selling periods. The price point is also relevant with the low end of the market (sub $500,000) holding strongest, largely due to affordability, with the middle and upper end markets less robust. More specifically, property priced between $1,000,000 and $1,500,000 appears to be struggling the most.
More generally, we note that a large number of low-rate fixed term home loans (established at around 2-2.5%) have started and will continue to mature over the next few months, and we assume that such a jump to a rate of now circa 6%, will result in mortgage stress. As more people choose to sell due to mortgage stress, this will in turn increase supply, and this coupled with a softened demand, will further soften values.
A recent ANZ forecast is predicting a decline of 17% in values across SA in 2023. I am more optimistic and suggest that a value decline in the order of 7.5% to 10% is more probable.
In any case, this will have a direct impact on your clients and may be reason to encourage a property settlement sooner rather than later.
Did you know?
Acumentis are one of the only valuation firms in Australia to require all staff undertaking valuations for expert witness purposes to undergo an internal certification process. Obviously, our valuers must be Associate Members of The Australian Property Institute, but we also require that they have at least 5 years of experience in the suburb of the subject property. Only after they complete the Acumentis Family Law accreditation training & be assigned & approved by their managers, can our valuers undertake Family Law valuations.