5 reasons buyers are in the driver’s seat this winter

Winter traditionally brings with it a lull in the property market, yet this winter is like no other. What’s in it for you if have plans to buy?

They say property cycles are seasonal in Australia: in winter we hibernate (owners don’t look to sell and buyers are less active), then in Spring bidders ‘bloom’ (excuse the pun) and homes pop up for sale in colourful abundance.

Autumn traditionally sees a rush of properties on the market as owners try to capitalise on pre-winter buyer activity, and Summer is somewhat disrupted by festivities and holidays. 

While this is probably an oversimplification of annual property patterns, the data gives the seasonal theory credence. The number of properties on the market last winter was down eight percent from Autumn, completed sales were down 17 percent and the auction clearance rate was down seven percent. That’s the lull we have come to expect to see in winters.

But this year has been quite different. Firstly, the market was robbed of its usual Autumn activity by a Federal election that had a focus on property policies including a threat to negative gearing and proposed changes to capital gains tax rules making investors, buyers and sellers alike more cautious. Investors certainly didn’t want to purchase when the inherent benefits of doing so might have been abolished.

This subdued Autumn activity was dulled further by an elongated period between Easter and Anzac Day, and innumerable negative headlines about the state of our market causing one pundit to predict that this winter would be the ‘tightest and quietest’ in recent memory. And from a seller perspective, he wasn’t wrong. The number of houses on the market has hit lows unseen since 2004, and properties are taking much longer to sell. But this can be great news for aspiring buyers. In fact, I’d say it’s a market advantage. Winter deters buyer so you don’t have the number of competitor bidders at auction or making an offer on stock. Plus, sellers tend to wait until Spring to sell and so with fewer vendors active in winter, they tend to be motivated to sell, happier to negotiate, and more realistic in their price expectations. These are just some of the compelling reasons to take advantage of winter stock. 

Read on for five reasons buyers are in the driver’s seat this winter.

1. Borrow up to 14 percent more from banks.  

Under changes finalised earlier this month banks will now be able to review and set their own minimum interest rate floor to gauge if a borrower can repay a loan, potentially increasing a customer’s or household’s borrowing capacity by up to 14 percent. A nice buffer when turning up to Saturday auctions! The regulator’s revision will mean that more customers can more easily achieve home ownership or a property upgrade. For example, a couple with a combined $200,000 annual income may have an extra $150,000 borrowing capacity. That could be the difference between an extra bedroom, a courtyard, a backyard, or a place a few blocks closer to your suburbs high street.

2. More borrowers emergemore loans and lower rates. 

Despite representing only 5 percent of outstanding loans, non-bank lenders Resimac, Bluestone and Pepper Money are lending a lot more often these days, with an increase of 12.5 percent growth in non-bank lending occurring over the past year. They’re getting competitive too. The current lowest variable rates now sit as low as 2.9 percent per annum, as non bank lenders seek to secure even higher market share. 

3. Lowest rates on record plus some tax cuts.

The emerging consensus is the rate cuts we’ve experienced this year, alongside the new $15billion tax cuts, will provide a sugar hit for the property market. These rate cuts are the first back-to-back interest rate cuts (in June and July) in Australia in seven years!  After the June decision around 50 lenders passed on the full cut, while 30 passed on part of the cut and seven did nothing. Did you know, there have now been 14 rate cuts since November 2011, all the way from 4.75 per cent to today’s 1 per cent?

4. The “The ScoMo effect” spawns renewed confidence.

That is the term coined to explain the property market activity that re-emerged when the Federal election was over and the threat of changes to negative gearing and changes to capital gains tax was removed. It was reported that many homes which had recently been passed in during the two-year housing slump sold at fantastic prices after the election.  

5. Property underpins $1 million in household wealth.

The main contributor to household wealth continues to be property, despite the recent downturn in the property market. The enduring value increases over the last decade in Australian property have contributed to the average household wealth (the value of all the assets owned by a household less the value of all its liabilities) topping more than $1 million, the ABS reported this month. It’s amazing how central real estate is to our financial health in this country.  

Personally, one of my life mottos is that there is more risk in inaction than action. That might not be your philosophy, but if you have been sitting on the sidelines waiting to buy, this might be your window. The only thing you get by sitting on the fence is splinters!