The latest property data showed further signs of the market changing, with house prices declining across most capital cities and the slowdown spreading across different price segments. However, while buyers are seeing more choice overall, the supply picture is becoming more complicated as fewer new listing come onto the market.
In this month’s Market Watch, Debra Beck-Mewing and Scott Hochgesang reviewed the latest market performance, the major developments likely to influence property conditions in the months ahead, and what changing supply levels could mean for buyers through Spring.
During this month’s IN FOCUS segment, Deb and Scott looked at the best strategies buyers can use after the post-Budget changes to property legislation. While some rules have changed, many of the fundamentals of buying well remain the same.
MARKET PERFORMANCE
Property prices continued to soften during August, with most data sources recording falls across the capital cities. Sydney and Melbourne again recorded some of the larger declines, while Brisbane, Adelaide, Perth, Hobart and Canberra also generally moved lower. Darwin remained the main exception, recording modest growth.
The slowdown has also broadened across different segments of the market. While the premium segments of Sydney and Melbourne have experienced some of the largest falls since late last year, more recent data shows declines extending across lower, middle and upper price segments in most major markets, though the regions remain resilient.
For buyers, however, the supply story is becoming increasingly tricky. Total listings are around 18% higher than the same time last year, largely because properties are taking longer to sell. At the same time, new listings are running around 3% below last year and 6.5% below the five-year average. This means buyers currently have more choice, but that position will change if fewer sellers bring properties to market.
Rental growth remains strong, particularly in Darwin, Hobart and Perth, although some of the latest monthly figures suggest affordability may be starting to limit further increases in some markets.
NEWS + MARKET INFLUENCES
As always, the podcast also reviewed the major developments over the past month that are likely to influence the property market in the months ahead.
The Reserve Bank held the cash rate at 4.35% in August, with inflation remaining above its target range ahead of the next interest rate decision on 29 September. Unemployment has also edged higher nationally, adding another factor for the RBA to consider.
Over the past few weeks, the Federal government has started to chip away at the property-related changes announced in the May Budget, including watering down the proposed rules affecting discretionary trusts. With some of the detail still evolving, buyers and investors will need to keep across the changes and seek appropriate professional advice.
Other announcements include Brisbane City Council reducing minimum lot sizes to 120 sqm in some locations, potentially creating opportunities for more compact housing, while continuing conflict in the Middle East and higher oil prices remain another potential influence on inflation and household costs.
IN FOCUS: Property Strategies After the May Budget
The property changes announced in the May Federal Budget altered some of the rules around negative gearing, capital gains tax and the way property can be purchased and held. That means some strategies need to be reconsidered, but it doesn’t mean the fundamentals of successful property buying have disappeared.
Buying well, avoiding overpaying, choosing locations with strong fundamentals, understanding who is likely to want the property in the future and considering rental return remain important regardless of the tax environment.
This month, Deb and Scott looked at three broad areas buyers can consider in the post-Budget market: home buyer strategies, new property strategies and existing property strategies.
Home Buyer Strategies
For home buyers, the principal place of residence can be much more than somewhere to live – it always has been one of the largest purchases individuals can make so ensuring the finance aspects are considered is important. Buying a quality home with good long-term fundamentals can provide both lifestyle benefits and a strong foundation for building wealth over time.
One option is to buy a property that can be renovated or improved. An older property in an established area may provide opportunities to increase both its functionality and value without having to rely solely on market growth.
Buyers can also look for extension, additional dwelling or development potential. That might mean purchasing a smaller home that can be extended later, adding another dwelling where planning rules allow, or buying a site that could potentially be subdivided or redeveloped in the future.
Another option is to build new or knock down and rebuild, particularly where the land is well located but the existing dwelling no longer represents its highest or best use.
Home buyers can also use their PPOR strategically over time. Rather than expecting the first purchase to meet every future need, buying well, improving where appropriate and upgrading when the numbers make sense can provide another pathway into the property a buyer ultimately wants.
New Property Strategies
For new property, the Budget changes left many of the existing tax settings intact, but Scott cautioned that new and established property markets don’t operate independently. When established property prices soften, buyers need to be particularly careful about the price they pay to build new.
One strategy is to buy a suitable duplex block, build two dwellings and subdivide, potentially creating equity through the development process rather than relying entirely on future market growth.
For buyers focused on cash flow, dual-income property can provide another option. This could include a house with an attached unit, granny flat or dual-key configuration, with the aim of generating a stronger combined rental return.
Scott is also seeing opportunities to build smaller, more affordable two and three-bedroom homes in premium or well-located areas. Reducing the size of the dwelling and land component can provide exposure to a desirable location at a substantially lower entry price.
First home buyers should also consider the assistance available to them, including State grants, stamp duty concessions and Home Guarantee schemes, depending on their circumstances and eligibility.
However, builder selection is becoming even more important. Buyers considering a new build should investigate the builder’s track record, financial position, previous projects and build quality rather than making a decision based primarily on price.
Existing Property Strategies
Despite the Budget changes, established property can still play an important role for investors and for those buyers who want to purchase as their home first, then swap it to being an investment or starting as an investment with a view to living in the property down the track.
The starting point remains straightforward: buy a good established property in an area with sound long-term fundamentals and hold it for the long term.
Rental return becomes particularly important when some of the previous tax treatment is no longer available. Buyers should consider not only the rent a property achieves today, but whether relatively simple improvements could increase its future rental return.
Another strategy is to buy established property with potential. A property that can be improved, extended, reconfigured or supplemented with an additional dwelling can provide opportunities to increase both income and value over time.
For buyers with the capacity and experience to take on a larger project, developing an existing site to create new housing can provide another pathway. An older dwelling on a well-located block may have subdivision, duplex or other redevelopment potential, depending on local planning rules. Creating new housing may also interact differently with the post-Budget tax rules, making professional tax and planning advice particularly important before proceeding.
Finally, commercial property remains an option for some buyers, particularly where strong rental returns or specialised opportunities can be identified. However, it carries different risks to residential property, including a smaller pool of potential buyers and tenants and potentially longer periods required to lease or sell a property. It therefore requires particularly careful property selection and due diligence.
WHAT’S NEXT?
The Spring market is providing buyers with more choice and softer conditions in many locations making buying a favourable activity, but that doesn’t mean every property represents an opportunity. New listings are running below normal levels, while broader housing supply remains constrained, so the soft market may not last much longer.
As always, buyers should be wary of misleading data, use trusted information sources and assess the financial pros and cons of a purchase against their own circumstances. The strategy that works for one buyer may be completely unsuitable for another.
Tune in next month, where the team will review the latest market performance along with the myths and traps in today’s property market, including the growing focus on so-called distressed listings and why buyers need to distinguish genuine opportunities from marketing designed simply to attract attention.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Editor of Property Portfolio Magazine and CEO of The Property Frontline. With over 20 years of experience buying property across Australia, Debra is a skilled property strategist and buyers agent known for uncovering tailored opportunities — from family homes to multi-use investments.
She has deep expertise in advanced strategies including renovations, granny flats, sub-division, and development. A Qualified Property Investment Advisor (QPIA®), licensed real estate agent, and holder of a Bachelor of Commerce and Master of Business, Debra combines strategic insight with hands-on experience.
Debra is the creator of the Property Smart Track System™ – a professional property buying system that enables buyers to select, assess and buy property independently in today’s market. She also leads Buy Like A Genius™, a premium end-to-end buyers’ agency service for busy professionals seeking expert property acquisition without the stress.
As a passionate advocate for greater transparency in the property and wealth industries, Debra is a sought-after speaker, author, podcast host, and participates on numerous committees including the Property Owners’ Association.
