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Experts say Spring will predict how the Australian property will act over the next 12 months

The first weekend in September traditionally sees a boost in listings across the country, as the warmer weather hits and sellers begin to emerge.

With the current listing numbers down significantly on the same time last year, the boom has well and truly worn off, and experts are predicting we’ll be able to see how the market will act over the next 12 months as it heats up for spring.

There are some important determining factors currently at play – lenders are tightening their policies, there’s an upcoming Federal election on the cards and ALP success could see potential negative gearing and CGT changes.

“Spring will help determine what the next 12 months will look like – although this will change if Labor wins the election. This looks likely following the recent insurgency on the former Prime Minister Malcom Turnbull,” RiskWise Property Research CEO Doron Peleg said.

“What we are seeing at the moment leading into spring is that the volume of properties being auctioned in Sydney is going up significantly, with preliminary auction clearance rates of 57.9 per cent (as published by CoreLogic on August 27, 2018). These are not the figures of a collapsing market. While auction clearance rates have slightly recovered we don’t expect to see anything sensational – but nor do we expect any significant price reductions.

“The auction clearance rate is a strong barometer of the market and we know at the moment prices are lower, which means it’s a buyers’ market and therefore more attractive.

“Buyers thinking about the long term, particularly owner-occupiers, may wish to take advantage of this opportunity.”

Mr Peleg went on to say that the price reductions we have seen in the bigger markets such as Sydney and  Melbourne aren’t as astronomical as originally feared.

“With all the scrutiny of lending applications, the price reductions we’ve seen following outstanding capital growth are actually quite modest. Dwelling prices went down by 5.5 per cent in the last 12 months.

“And while investor finance is at a low, it’s still around 40 per cent; it means investors are still very much in the market. Yes, it’s dropped but they are still there, and we know changes to investor activity do have an impact on the market.”

According to data released by CoreLogic, Sydney had the largest decline in rents on record with a 0.4 per cent annual fall, with demand for rental properties taking a big hit over the past 12 months – down 25 per cent.

The vacancy rates for July in Sydney also went up, giving investors even more reasons to desert the market.

“We are not expecting any significant upsets in Sydney or Melbourne and if anyone is looking for substantial recovery it is unlikely. Ultra-low interest rates, low capital growth and low rental returns … it’s not something you see every day,” said Mr Peleg.

“This question of what will be the shape of the market for the next 12 months is not a standard one that simply addresses supply and demand under normal market conditions, because the answer is determined by credit standards and restrictions, as well as Labor’s proposed policy changes to negative gearing and capital gains tax if elected.

“We already have scrutiny of loan applications, lending restrictions on investors, and potentially out-of-cycle interest rate increase affecting the market. Everything is in the hands of the lenders. What will happen this spring? Ask the banks and the policy-makers.”

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