Ray White Now | Updated weekly Ray White Now | 26 May - Page 8

If I am considering selling, why should I go to market now? While the current selling conditions are strong, it remains extremely hard to predict what may happen in the property market over the next 12 months and certainly the next few years. There are many economists predicting that property prices will decline over the next year or so. When you consider the two basic fundamentals that drive property prices, supply and demand, many are suggesting that supply may outweigh demand in the next six to 12 months and possibly longer, creating conditions less favourable for sellers. How have these opinions been derived? The key government stimulus packages (JobKeeper and JobSeeker to name the two most significant) are currently scheduled to end in September 2020. Banks have offered a large number of homeowners mortgage deferment support which is also scheduled to end in September 2020. Many experts are saying that when these support measures come to an end, we will start to see larger volumes of new properties come onto the market causing a large supply of properties available for purchase. Regarding buyers, the withdrawing of government stimulus and the potential for a steep rise in unemployment may result in less buyers having the ability to purchase properties. The Australian Treasury is forecasting unemployment to reach 10 per cent in the months ahead. Home values are holding up strongly after two months of Australia in lockdown, but a big test looms in October when government and bank assistance dries up. New data from CoreLogic shows capital city prices have barely moved in two months despite warnings by some forecasters property values could collapse by 30 per cent. Economists and real estate specialists say prices have been propped up by JobKeeper and other government stimulus, lenders’ mortgage repayment holidays and ultralow interest rates. What many economists are saying that the next 12 months may hold: • JobKeeper and JobSeeker support finishes; • Mortgage deferment support ends; • Significant rise in unemployment; and • Therefore the number of properties for sale will increase and there will be less buyers looking to purchase property. There are some economists that are not as concerned by these potential risks to the economy. They point out that significantly low interest rates will provide an important buffer to home affordability, and that the rise in unemployment is in sectors that will not materially impact buyer activity. However, even these economists acknowledge the downward pressure on prices over the short-term. Because of the above considerations, the news is full of comments by economists speculating that property owners will not achieve a better result by waiting to sell in six to 12 months or even longer. Late last week Paul Bloxham, chief economist at HSBC, said Australian house prices could tumble 12 per cent in 2021, as a U-shaped recovery and COVID-19-related policies take their toll. The Government has revised JobKeeper from costing $130 billion to $60 billion. The good news is this means Australians won’t have to borrow as much money to cover the scheme. 8 It’s for these reasons that many are saying if you are thinking about selling over the next year or two, now could be the best time to achieve the best result. Selling now takes many of the above risks out of the equation and enables you to sell with maximum certainty. The alternative to avoiding the potential risks ahead is to postpone selling your property for the next few years if you are comfortable to do so. The information is general information only, not financial advice, and does not take into account your individual objectives, financial situation or needs.