6 reasons why 2023 could be a good year to sell
With consumer sentiment high, auction activity surging and property values reaching record highs, it’s clear that in many parts of the country, we have entered a seller’s market.
If you’re considering putting your property on the market, here are some reasons why 2021 could be the optimal time to sell.
1. Consumer sentiment is high
Consumer sentiment is an important indicator that measures how people feel about their personal finances.
If consumer sentiment is high, it shows that people are optimistic and confident about their financial situation and are more likely to make major purchases, such as property.
Data from the Westpac-Melbourne Institute of Consumer Sentiment Index shows nationally, consumer confidence is well above pre-pandemic levels, with the overall index +14.2 per cent higher than the same time last year.
Westpac Chief Economist, Bill Evans says that the latest sentiment results continue to signal strong confidence.
“...the bounce-back in February signals that the consumer remains extraordinarily confident,” he said.
Results from our latest Consumer Sentiment Survey also reflects the surge in consumer confidence with 82 per cent of Australians believing property prices will increase in the next 6 months.
The low number of COVID-19 cases around the country as well as the rollout of the vaccine is expected to further increase sentiment in the months ahead.
2. Bank loan deferrals have been falling
Following the economic impact of the pandemic last year, banks offered temporary deferrals on mortgage loans to Australians who were struggling to make repayments.
Mortgage deferrals are set to end on 31 March 2021, coinciding with the wind back of the JobKeeper payment and JobSeeker supplement.
Concerns over the concurrent withdrawal of these support measures have dissipated as the Australian economy continues to outperform forecasts.
Australian Banking Association (ABA) CEO, Anna Bligh said in a recent interview with ABC NewsRadio’s Thomas Oriti, that mortgage and small business loans are recovering.
“We’ve now seen almost 90 per cent of these people, the 900,000 Australians who deferred their loan repayments, are now back making those payments,” she said.
With the current recovery of bank loan deferrals, there is a low chance of an influx of distressed sales entering the market when the wage subsidy scheme ends.
This is good news for potential home sellers, especially in international investment areas as there is less risk of an oversupplied market which could make it more difficult to sell.
3. Auction clearance rates surging
CoreLogic preliminary clearance rates reveals strong auction activity around the country with every capital city recording a clearance rate above 70 per cent in the week ending Sunday the 7th of February.
Sales volumes were highest in Melbourne with 594 auctions and an impressive clearance rate of 80.8 per cent. One year ago, the clearance rate was lower at 68.5 per cent across a lower volume of 419 auctions.
The 449 auctions held in Sydney also performed extremely well, returning a preliminary clearance rate of 89.1 per cent. One year ago, a lower volume of 384 auctions across the city had a clearance rate of 77.6 per cent.
In our smaller markets, Canberra returned the highest clearance rate of 92.7 per cent, followed by Adelaide (82.8 per cent), Perth (75 per cent) and Brisbane (74.6 per cent).
A recent article by Domain supports this data, reporting that Sydney auction clearance rates hit a 24-year high on the weekend.
The article cites low interest rates and pent up demand resulting in agents inundated with buyer interest, long queues at open-home inspections, dozens of pre-auction offers as well as competitive bidding at auctions which is pushing prices well above reserve.
4. Sustained low interest rates
Following its first board meeting of 2021, the Reserve Bank of Australia (RBA) has left interest rates unchanged.
Governor Philip Lowe announced in a speech to the National Press Club of Australia on the 3rd of February that the central bank cash rate will be left at 0.1 per cent and will be kept at record lows for at least three years.
“So the message is: interest rates are going to be low for quite a while yet,” he said.
Sustained low interest rates will further encourage buyers to enter into the market as well as allow homeowners and property investors to service larger loans.
Low interest rates generally boosts real estate activity which in turn, increases property prices.
5. Expected easing of lending restrictions this year
In an effort to mitigate the effects of the pandemic, the Federal Government plans to change credit laws, making it easier and quicker for Australians to secure a loan.
The proposed new laws will scrap responsible lending obligations and thus reduce the verification process meaning that borrowers will not have to hand over as much information to banks as they currently do. Rather than the burden put on banks, borrowers will be more accountable for providing accurate information.
Treasurer Josh Frydenberg says that the reform will increase the flow of credit which is critical to Australia’s economic recovery plan.
“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs,” he said.
Prices once out of reach for home buyers will become attainable as they are able to borrow more. This in turn will push up demand, competition and subsequently, property prices.
If the proposed legislation passes, changes could come into effect in March 2021.
6. Demand continues to outstrips supply
New figures from SQM Research released in early February found that nationally, total listings are down -10.5 per cent over the year.
While supply remains low, buyer activity has been ramping up.
The latest Australian Bureau of Statistics (ABS) figures show housing loan commitments reached record highs in December 2020.
First home buyers are out in full force with loan commitments surging +9.3 per cent, a massive +56.6 per cent rise over the year and the highest level since 2009.
ABS head of Finance and Wealth, Amanda Seneviratne attributes the surge in loan commitments to government grants and incentives.
“Federal and state government measures, such as HomeBuilder, and historically low interest rates are supporting ongoing growth in housing loan commitments,” she said.
According to Tim Lawless, CoreLogic’s Research Director, if the current trend of overwhelming demand continues, house prices will continue to rise.
“At the moment, despite our expectation of a lift in new listing numbers, buyer demand is still outpacing new stock additions. If this trend persists, the rapid rate of absorption is likely to keep overall stock levels low resulting in further upwards pressure on housing prices,” he said.