HTW sees signs of a rejuvenated residential market

With Perth a notable exception

HTW sees signs of a rejuvenated residential market

In contrast to last year’s subdued spring, recent weeks have witnessed a significant uptick in residential activity, especially in metropolitan areas, according to Herron Todd White.

In HTW’s November Month in Review, Ben Esau (pictured above), national director of residential, said that the surge in transactions and listings signals a return to a more traditional “selling season.”

“Overall stock levels still appear to be below long-term averages but the spring injection of new properties for sale coupled with other market factors is creating more balance between demand and supply nationally, resulting in a slowing in price growth in several markets,” he said.

“Those other market factors include continued cost-of-living pressure resulting in poor consumer sentiment and reduced spending, and in November we can add an RBA which has not finished with their rate hikes for this cycle.”

A notable exception is Perth, which continued to experience robust price growth, driven by low stock levels, strong employment prospects, and wealth from elevated mining activity. Several prestige transactions in spring could potentially fuel a fear-of-missing-out dynamic in the upper market.

Prestige market dynamics and demand trends

Historically, the prestige market has served as a lead indicator for where the broader market is headed. In this current cycle, Esau said it seems that the prestige market may initially follow, then lead, displaying greater resilience to the same adverse factors.

While the $5 million to $10 million markets in Sydney and Melbourne respond to contractionary market factors mentioned above, the $10 million-plus and prestige markets in other cities continued to experience strong demand against limited stock, the WTH report said.

Across the east coast, well-financed local, overseas, and transitioning purchasers, alongside younger buyers with recent financial success, contribute to a robust and cashed-up demand pool.

In markets like Adelaide and Perth, overseas interest is lower than on the east coast. However, the allure of value for prestige properties attracts returning residents or those relocating interstate.

Need for policy changes, market outlook

“A continuing challenge for policy makers in the wider property market is that, while slowing, it is still generally behaving counter to general economic sentiment,” Esau said.

“The lifting of interest rates and resultant property price downturn throughout 2022 was more in line with the desired intent of policy changes. A property market recovery in the face of increasing costs to service mortgages and sticky inflation may test how far the RBA is willing to push Australia’s, so far, resilient property owners.”

Esau leader noted that traditional factors influencing property prices may not exert the same impact on the prestige market.

“While a potential credit crunch could influence the prestige market in the future, current indications suggest otherwise, showcasing resilience in this segment,” he said.

To see how the industrial real estate market is performing according to the HTW November report, click here.

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