By Sean Casey – Property Advisor

There’s no doubt about it…the property market is changing.

Truth be told, after two years of continued strong performance – whilst everything else was thrown into uncertainty – perhaps it’s no surprise that finally the property market would feel the effects of the repercussions of the global pandemic.

As COVID-19 swept across the world in 2020, it brought with it uncertainty to financial markets all across the world, and Australia was no exception. Federal reserves slashed interest rates to stimulate economies, and stimulate it did. Interest rates were at record lows never seen before, and the economy remained steady in a time of uncertainty.

Those that were affected by the pandemic were afforded Job Keeper, and for other workers, it brought a new age of working from home and homeschooling. The flow-on effect of spending more time in our homes brought great value to the spaces where we spent most of our time inside.

Long commute times were replaced with setting up a desk from home and commuting from bedroom to lounge room to start work.

No longer was a centrally located apartment the flavour of the month.

Instead, buyers wanted a home with room to move.

The record low interest rates increased borrowing capacity, and our appetite for more space to live in became apparent. Regional markets flourished, and areas with lifestyle drivers (think water, hills, green open spaces) were highly sought after.

At one point in this period, the clearance rate was 97% which means 97/100 properties at auction were selling, and the majority of them were selling very well. Prices increased 10-30% with homes that had a land component to them, whilst the apartment market was left behind.

With the arrival of vaccines and the risk of COVID-19 reduced, it was time to transition from lockdowns to a new normal. A flow-on effect of record low interest rates was a soaring inflation rate, clocking in at a mindblowing 6.1%.

It was the RBA charter to now balance the economy and bring interest rates up to curb the rising inflation numbers with its aim to get the inflation rate to 2-3%.

In the same way, the interest rate cuts helped to drive rising prices and the overall strong performance of the property market in incredibly uncertain times, the now-increasing interest rates will have the opposite effect on property prices.

We are already seeing this come into play.

Those affected first will be the purchasers that have minimal financial buffers in place:

First home buyers, lower-wage employees and those that over extended on record low-interest rates.

The result? Fear of missing out – or FOMO as the kids call it – has been replaced by a fear of over-paying.

Whilst in the peak of the market – which with hindsight, we can see was during October-November in 2021 – most homes were selling under auction conditions, including homes that would traditionally struggle to sell.

Now we are seeing a more balanced market with renovated family homes still selling at a premium, whereas properties that require renovation aren’t looked at as fondly as their renovated counterparts.

At the time of writing, it feels like the market is more balanced now and buyers have shifted towards a more conservative approach.

We are nearly 12 months into a market correction and past experience tells us that these corrections tend to last for 12-24 months.

So, while buyers are trying to pick the bottom of the market it is important to remember that if a home comes to market that suits your needs, it would be worth considering it and having confidence that you are purchasing in a market trough, not a peak.

Just like seasoned stock investors love to talk about buying “when there is blood in the streets”, this adage also applies to real estate.

The most important thing to remember when purchasing property is that you are buying a home first and foremost, and an investment second.

If the home suits your needs and you can see yourself comfortably living there for 5-10 years, then it is worth considering as a purchase, regardless of where the market is at.

As property is a long-term investment, the same mindset should be applied to a purchasing strategy and look over a 10-year period that property prices increase.

If you find the right home, go for it!