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  • Is this sellers' last window of opportunity for peak prices?

Is this sellers' last window of opportunity for peak prices?

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Interest rates have started to rise, and that's going to have a big impact on the Australian property market moving forward. What does that mean for sellers today? 

With buyers about to find their borrowing power reduced and home prices expected to decline later in 2022 and into 2023, this may be a final chance to lock in a top sale price. 

We spoke with BuyersBuyer co-founder and all-around property expert Pete Wargent about what's to come and what opportunities are left for sellers.

The last 18 months of growth could begin to wind back

It wasn't long ago that the Reserve Bank of Australia (RBA) was adamant that interest rates would not be rising before 2024. Now that inflation is surging, they've had to change course quickly. 

Mr Wargent said that, with "tremendous pressure" on energy, oil and commodity prices around the globe, it's not a question of 'if' but how far and how fast interest rates will be hiked. 

There are any number of predictions out there around how this could all turn out. To pick one from the bunch, AMP Capital's Shaun Oliver expects the cash rate to rise to 1.5 per cent by the end of 2022, with further increases expected next year. 

Mr Oliver said that could drive home prices down by -10 to -15 per cent between mid-2022 and early 2024. 

"The economy is strong, but interest rates are rising, so it's a bit of a fool's errand at the moment trying to predict what's going to happen with all of the different things that are going on in the world," Mr Wargent explained. 

While the future figures may be clouded in uncertainty, what does seem clear is that the property market is entering a new post-boom period that will deliver different conditions and results than we saw throughout 2021. 

Can sellers still achieve a top price? 

Rising interest rates means buyers will see an increasing reduction in their borrowing power. 

"I think there has been a broad sentiment shift," Mr Wargent said. From this point, "if there are price gains they'll be much more moderate."

Pete Wargent is wary that Australia's strong economic recovery may continue to drive interest rates higher. 

With prices already reaching their peak in Sydney and Melbourne, and a downturn expected to hit elsewhere as the year goes on, this may be a final opportunity for sellers looking to lock in the huge gains that have been built up over the past 18 months. 

The sooner-than-expected rate hike may have made some buyers more cautious about how they move forward, but others are eager to make the most of their pre-approval in today's low-rate environment while it lasts. In any case, properties will still be bought and sold. 

As several agents recently told us, setting asking prices and price guides at the right level is critical to enticing buyers who are now less impacted by FOMO. 

"There was a long period where people were buying properties sight unseen because they couldn't get to open homes or the auctions were online. That's finished now," Mr Wargent noted. 

"You want to try and make sure you make a good impression by presenting the property well and giving people time in the campaign to inspect and get familiar with the property."

Having a top agent on board who understands the local buyer pool and can price and market a home accordingly will ensure the best chances of a strong result.

What are the next steps that sellers should take?

If securing a top sale price is a priority, listing sooner rather than later may be the safest bet before the market begins to dip. 

Many agents also paint winter as an excellent time to be coming onto the market since spring generally brings a period of oversupply. 

"Typically, a lot of sellers have the mindset of selling around spring. It's warmer, it's nicer, however, there are a lot more properties to compete with," Shiv Nair of Ray White TNG in Sydney said

"I think right now is a great time to sell. My advice is always to sell in isolation rather than in competition."

Focusing on presentation and marketing is also essential in times of downturn. Properties perceived as A-grade will always attract competition, whereas lesser homes are more likely to run into difficulties as the market weakens.

Mr Nair said that simple things like impeccable cleaning, a fresh coat of paint and quality home staging all go a long way to creating that A-grade impression. 

Every market is different, so understanding your local market will be critical. Using an online property value estimation tool  and comparing similar recent sales will give you a better idea of where your property sits in the market, and speaking with a top local agent will help you to begin making a plan for a successful sale.