The first rate cut drew a line in the sand. Everything since then has been to plan
We’re seeing more and more stories from a property market that is clearly heating up.
Last week, a deceased estate in Rosebery, Sydney with no power and which was ‘completely unliveable’ smashed expectations at auction, eventually selling for $2.5m.
That was a cool $400K clear of the reserve:
The strong opening bid of $2 million reduced the 12 registered bidders to three, then two after an investor was knocked out when bidding hit $2.3 million. Chris Skarlatos, another real estate agent at The Agency, called the result for the two-bedroom home, which was offered for the first time in 90 years, was “very strong”.
“It was way above everyone’s expectations because the home wasn’t liveable. You have to connect power and redo the kitchen just to [live] there,” Skarlatos said. The home sold to a local architect who had been searching for two years.
Quick lick of paint. She’ll be right.
But expect to see more stories like this. The national auction clearance rate is at the highest level in over a year now, and the momentum is clearly upwards.
And look, none of this is unexpected. We knew that when interest rate cuts landed, that was going to draw a line in the sand. The possibility of softer price results was passed. From the buyer’s perspective, we’re quickly moving out of wait-and-see into fear of missing out.
That motivation on the buy side is going to translate into strong sales and rising prices.
And you’re seeing it in the price data already.
The national quarterly growth rate of 1.4 per cent – up from 0.9 per cent in the March quarter – put Australian housing values on track for a 5.8 per cent annual gain this year, according to Tim Lawless at Cotality (formerly CoreLogic).
“It’s definitely this re-acceleration in the rate of growth since the point of inflection in February,” he said.
“Interest rates are going to be coming down further [and this] should support further price growth.”
But that 5.8% figure is an annualised one. It takes the current quarter and assumes that’s what the next three quarters are going to do to.
As Lawless notes, it’s a ‘conservative’ guess, because prices are likely to accelerate even further in the coming quarters.
Bank of Queensland chief economist Peter Munckton, for example, is predicting a 10-15 per cent jump over the next two years.
Yep. Could even be north of that.
Rate cuts are going to combine with strong immigration inflows and safehaven flows from overseas to give us strong price results for the next 18 months at least.
DB