With a record real estate run coming to an end, a potted history of housing shows a breather may not all be bad news.
Let’s start by going back three decades.
When Bartlett and Co. Property principal Tim Bartlett started in real estate in January 1990 the official interest rate was a punishing 17.5%. The average Australian house price was $184,600, up from $76,500 a decade earlier. New loans averaged $71,000 and were paid for by an annual salary of $27,227, representing about 45% of income.
How times change.
Fast forward to May 2022 where the average Australian wage is $67,860, the average dwelling $738,975 across all markets and new loans are typically written at $612,946 against an official RBA interest rate of 0.35% and expected to climb further.
The message? It’s always been difficult to buy a house.
Of course, averages rarely tell the full story. When it comes to the real estate market, it is more useful to talk about specific markets. Take capital cities and major regional centres like Wollongong and Newcastle, and you can likely add a premium to those figures.
Still, owning a home is a central tenant of the Australian dream. Getting a foot on the first rung of the ladder has always been at the aspirational heart of Australians and upgrading your way into your dream home a tried, tested and popular strategy.
In May, the major Australian political parties took the issue of home ownership to the election. The Coalition proposed a 40% dip into superannuation to fund a new or existing home capped at $50,000, while Labor offered a 40% stake in a shared ownership scheme.
Where to from here?
Property bears have been calling for a significant retreat in home prices for some time after stunning gains in the last 18 months, the home owner has two options when it comes to flat or falling prices; fret about storm clouds or see the silver lining.
Headlines can represent storm clouds (Channel 7 recently headlined with ‘plummeting’ to describe the 7% drops in trendy Darlinghurst and Surry Hills units) to a public who rely on confidence in real estate for the wealth effect and whose household budgets are more sensitive than usual to tightening interest rates.
The reality is that fear is misplaced in a real estate market that is taking a breather. Just as there are many different markets there are equally as many buyers and sellers with different circumstances, loan sizes, aspirations. Truth is, headlines have a way of lumping everyone into the same category.
But is there a silver lining when it comes to flat – or heaven forbid, falling – property prices?
According to Tim Bartlett, you bet.
“When the buoyancy comes out it slows down the pace of the market. Suddenly sellers who were previously worried about selling and finding that next place now have a bit more time on their hands,” he says. “It’s much less hurried.”
And while timing the market is never a good strategy, Tim says that selling and buying in the same market is important.
“Whether you are looking to upgrade to your next home or downgrade as an empty nester, it’s important to buy or sell in the same market.”
“It’s all relative,” Tim says. “Of course, no one likes selling at a discount, but if you are after an upgrade and you play the percentages game, getting a bigger discount on purchase of your next home offsets the discount on your sale.”
“It’s a great time to sell and upsize,” he says.