Assessing the property market is an essential task as an investor. Australia’s property market is dynamic and often changes from year to year.
Combination models of key performance metrics can help buyers and sellers read the market. Some of the fundamental metrics that influence investments are cash rate, industry regulations, prices at auctions, and online property listings.
In this article, we’ll discuss these property market metrics in depth.
The cash rate is the base lending rate set by the Reserve Bank of Australia (RBA). The higher the base lending rate, the more expensive it is to purchase property or develop it. Conversely, the lower the base lending rate, the more attractive it is to buy or sell the property since borrowing rates are lower.
When there is the anticipation of an increase in the cash rate, there’s a greater demand from buyers. They feel incentivised to take out property loans at lower rates. However, this greater demand will eventually lead to higher property prices.
On the other hand, a projected decrease in the base lending rate will lead to less demand from buyers.
Regulations in the Industry
Financial and real estate development regulations have a significant impact on property market values. Favourable laws mean it is cheaper to develop on land and renovate homes.
These regulations for lenders directly affect buyers. Stricter regulations mean less favourable loans for buyers. These regulations are set and updated by the Australian Prudential Regulation Authority (APRA). You can read the news and publications on the APRA website to stay up to date.
Prices at Auctions
Home prices at auction can Indicate investor sentiment. If properties at auctions are highly valued, buyers will meet or exceed the seller’s asking price. In these cases, sellers can find better profitability than in the retail market.
How can you tell you if it’s a seller’s market? You can check the auction listing volumes against the rate that they’re purchased. Low volumes of properties with high clearance rates indicate a seller’s market. Conversely, high volumes of properties with a low clearance rate signals that it’s a buyer’s market.
Online Property Listings
Looking at real estate listings online can be a direct way to gauge market prices. If homes seem underpriced, this is good for buyers. However, sellers should wait until prices start to rise.
If homes are overpriced, this indicates a property boom that’s favourable for sellers. It can also show that a future downturn is coming. On real estate websites, charts from recent years indicate the rise and fall of property prices that you can compare with the current state.
Here we’ve listed the key factors in assessing the price development in the real estate market. Rather than looking at the metrics in isolation, it’s essential to consider a combination of several in tandem.
In sum, check multiple sources such as the cash rate, auction prices, regulations, and online property listings to assess the property market. This will lead to the wisest investment choices as you look to buy or sell a property.