The 50 basis point cut made by the Reserve Bank (RBA) last week sent a positive signal and may improve consumer confidence, but don’t expect a sudden resurgence of demand says one of the nation’s foremost property forecasters, Michael Matusik.
Over the past decade, the connection between cheaper money and housing market improvements has been broken, he says, by artificial stimulus like government first-home buyer grants and building boosts. These have distorted the normal property cycle, inflated demand and prices, and have made the housing market more cyclical than it used to be.
Underlining Matusik’s point is the fact that despite falls of nearly 1.5% in mortgage interest rates in the past year, new housing starts have continued to decline, and, soft April home values show that despite a somewhat stable start to 2012, national home values have slipped 0.7% year to date.
Market ‘hole’ coming
With a raft of government incentives coming to an end, demand that has been brought forward may soon lead to a ‘hole’ that could last three to six months, or longer says Matusik.
Research reveals what’s ending, where and when…
What will it take to lift the market?
Residential property, especially new housing stock is over-taxed. If we’re to lift new housing starts, Matusik says we must:
- Increase the speed of population growth.
- Increase the supply of raw land across urban Australia
- Reduce approval times and unnecessary compliance red tape
- Allow the market to dictate demand
- Have new property valuations based on rental returns, not market comparisons
- Reduce taxation on property (HIA research shows this is up to 40% of a new home’s final price)
- Remove GST on new construction
- Remove stamp duty from off-the-plan sale.
However, the biggest problem affecting demand is the current oversupply of property for sale. Buyers are simply spoilt for choice and too many vendors are unrealistic in their expectations.
Healthy supply levels run at about 200,000 homes for sale at any given time. Australia currently has 400,000. Even a 1% or 2% drop in interest rates is unlikely to make an impact on their salebility, unless it is combined with sharp market pricing and aggressive marketing.
Make a decision
Matusik has some sharp advice for vendors who are overpriced, have been for sale far too long, and ‘who haven’t got a clue’.
He suggests that with rental vacancy rates running at just 1.7%, they should…
- Renegotiate mortgage finance
- Take their property off the market
- Lock into a low fixed-interest rate for a couple of years
- Rent the property out
And for those who really need to, or want to sell…
- Understand their dwelling’s value and accept the market – rip the bandage off and move on!
- Assign one good agent (multi-listing is sales death in a buyer’s market)
- Give your agent a short time frame to sell – 30 days
- Require offers on signed contracts – no verbal offers
Promote, promote, promote
You can’t sell a secret.
So, vendors who want to stand out from competitors must invest at least 1% of their home’s predicted sale price in marketing. Without some serious marketing push, there’s just no chance of standing out. Get professional photos taken and set an asking price – recent research shows 75% of buyers don’t even lift the phone to make an inquiry on properties without an asking price.
As with selling a car, presentation must be immaculate, every single time a buyer looks at the property. Clean the windows, light the fire (if you have one), trim the garden, plant or display fresh flowers and open all the curtains.
As Matusik correctly says, many may disagree with his views. However, for vendors who have a property that has languished on the market for more than six months, smaller or lesser actions are simply like re-arranging deck chairs on the Titanic.
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