What causes the property market to shift?
At any given time of the year, there’s a lot of media commentary dedicated to the state of the property market, including whether prices are up, down or stable.
But it begs the question, what exactly causes the property market to shift? And how can you predict what might happen next?
A whole lot of factors
Like the stock market, currency market, or pretty much any market, the property market goes through ups, downs and cycles, and it’s not just one thing that prompts it to swing one way or another.
Often, it’s a mix of factors including elements that are a little harder to put your finger on, such as general consumer sentiment, or even world affairs.
That said, there are a couple of ingredients that do tend to influence the market, so let’s look at some of the usual suspects.
Supply and demand
The biggest factor affecting the property market is supply and demand. If there are lots of houses available, but little demand, that will cause house prices to drop.
But if there are few houses available and lots of demand for properties, the prices tend to rise.
As is well-known, Australia is currently in the grip of a housing shortage, which is part of the reason for the recent increase in house prices.
But it’s far from the only factor….
Interest rates
Interest rates affect how affordable it is to service a mortgage. The higher interest rates are, the more you pay each month for the interest on the balance of your home loan. The lower they are, the less you pay each month.
As a result, demand to purchase properties tends to increase when rates are low, and that can lead to price rises due to increased competition.
Conversely, the market can taper off when rates are high, with prospective buyers more wary about taking on a loan.
Supply is also more likely to be high when rates are up due to people offloading properties with mortgages that are more expensive to service.
Borrowing power
Interest rates also have an impact on people’s borrowing power, and this too can impact demand for properties.
For example, when rates are low, people tend to have more ‘borrowing power’ as in they have the ability to affordably borrow more money.
Policy
Government policy impacts the property market in a host of ways. For example, the first home owners’ grant helped spur on a whole new generation of prospective buyers looking to enter the market.
Meanwhile, stamp duty has long been touted as one of the biggest barriers to the older generation downsizing, which could potentially free up housing stock.
And then there’s things like negative gearing, which acts as an incentive for investors.
No crystal ball
The reality is, no-one knows for sure exactly what the market will do in the short or long-term, and as the pandemic taught us, there are lots of unforeseeable factors which can impact the market for better or for worse.
That means, the decision on whether to buy or sell comes down to the individual and their circumstances, factoring in budget, their goals, and how the current market affects them.
How we can help
If you’re considering buying or selling a property and seeking to understand the current market conditions, why not chat with one of our friendly agents to understand how we can help?
Or feel free to enter your address below to get your instant property estimate.
We’re not just about property, but the people and the stories behind it. You can also view our list of currently available properties here.
