There have been three significant events that have led to a slow down in the Adelaide property market. The first event was the Federal Election. Lots of people are aware that the market always dissipates in the lead up to a Federal Election, but this year was particularly significant with Liberal and Labor Parties both with very daring ideas about economic policy relating to real estate.
The second significant event was the Royal Commission into banking, which of course caused a tightening of lending policy. What that meant in real terms is that whatever loan amount you would have been approved for this time last year, if you had revisited the bank again today, you would find that you would only be approved for 85% of the amount that you would have been approved for last year. And that was for a home that you would have intended to owner occupy, if you had intended to buy an investment property, you would have only been given 75% of what you would have been approved for last year. This has meant lower prices being achieved by prospective residents selling their homes to fund their move into the Brighton Dunes.
The third significant event was the media coverage of the national pricing recession, and we are now in a national pricing recession. However, Adelaide along with Tasmania were the only two states that did not actually reflect a reduction in prices. We did however grind to almost price paralysis with capital growths just above 1% for the last year – so very insignificant growth indeed. What we did see however, was an enormous drop in the clearance rate. The official clearance rate dropped from 88% to 49% and days on market blew out from 30 days to around 65 days. What this meant was it was an enormously polarising because around 50% of those bringing their property to the market were achieving good prices and a timely sale, while the other 50% were simply being left on the shelf. Buyers started to understand that they had more choice than ever before, and that they also didn’t feel a need to rush their decision.
Who was selling and who was failing to sell? Well what we saw was that most people that focused on beautifying their properties, refreshing them for sale, styling them, presenting them well, coming up with marketing campaigns that maximise eyeballs on the property and pricing them sensibly were still achieving really great prices and really timely sales, and there was still strong competition for those properties. However, people that were overpricing their properties, were not bothering to market them well, not bothering to present them well, were simply being left on the shelf. The days of bringing an overpriced, under-presented property to the market, under the expectation that somebody will still buy it, are now gone.
So what’s going to happen now? Well I am pleased to tell you that the Federal Election is now behind us and we have already seen an immediate return in buyer activity. Also, the RBA recently dropped interest rates further which will stimulate more buying activity. And thirdly, the media is now moving off of this story about a national pricing recession as those prices really come to rest at their low points and a lot of markets now suggesting that future growth will be upwards again.
So it is now again a more level market, but what we learnt from this experience is the significance of presenting your home beautifully, marketing it intelligently, and pricing it for competition. A lot of people are now flagging that spring will be an excellent time to sell.