Market building despite buyer caution

AUSTRALIA’S property market has fallen in the last six months, driven by interest rate increases.

But what does this climate, which is having a greater impact in capital cities, mean for the market in the Ballarat region?

Buyer’s agent Lloyd Edge is the author of property investment guide Positively Geared and said eight consecutive interest rate hikes has decreased the amount buyers can borrow from the bank.

“People are getting a bit nervous about buying,” he said. “But what we’re seeing is the regional markets, Ballarat included, have plateaued out but are sitting quite firm.

“There’s quite a lot of interest around Ballarat because the renting yields are higher. The average yield in Ballarat is 3.3 per cent, where in Melbourne it’s well under three per cent.

“Investors looking for a better return are flocking to regional areas, like Ballarat.”

Mr Edge said it’s a buyers’ market, which he expects to remain for the next six-to-nine months.

“The RBA is probably going to sit tight for a while and see the effects of those interest rate rises.

“There’s also a bit of a lag, particularly when there’s going to be a lot of people coming off a fixed rate this year. That could affect the market even more,” he said.

“There’s less homebuyers getting into the market at the moment, but investors have started to come back.

“If they can get a return on a property and get enough cash flow to cover mortgage repayments, there’s opportunities to buy there, there’s less buyers in the market, and vendors are more open to discounts.”

Ray White Ballarat director Will Munro said he’s noticed buyers are cautious, which he said can come not only with an interest rate shift, but change in government.

“Where 20 groups might have come to an open house, and five or more might have been bidding for it, that’s not as frequent as it was,” he said.

“But there’s probably more on the market as well, so there’s more choice.”

McGrath Ballarat director Daniel Nestor said he’s seen the local market revive through spring and summer, and open-for-inspection traffic is rebuilding.

“That gives us confidence that we’re heading in the right direction, although it’s still a market that’s heavily reliant on pricing property the right way,” he said.

“If you miss the mark by five per cent you simply won’t have the activity or sell the property. If you price it right, you’ll sell it. People are much more savvy with their buying.”

Although the market has softened, and some buyers have been taking their time, Ballarat continues to boom, and homeowners could make hundreds of thousands of dollars on resale in just a year or two.

The Real Estate Institute of Victoria reported multiple suburbs’ median house prices grew significantly throughout 2022.

“For the 12 months, Nerrina went up 26.9 per cent, Black Hill was 23.1 per cent, and Canadian was 15.7 per cent,” Mr Munro said.

“For the December quarter, Ballarat’s median house price went up .9 per cent in that last three months. In Sydney and Melbourne there’s a bigger swing, but there’s a lot of positivity in our local market.

“Coming back in January, we’re seeing sales happening, a lot of offers are being made. Buyer confidence is back out there.”

However, the market is not only made up of inner-city and suburban homes. Mr Nestor said rural and lifestyle properties, which are just a short drive from Ballarat in areas like Haddon and Smythesdale, are “performing extremely well.”

“Off the back of COVID, people looked for more space, or a tree change, on anything up to 20 acres. The volume in the rural and lifestyle markets is incredibly good,” he said.

“In our office, the rural and lifestyle figures are very consistent with what they were last year, whereas our residential sales agents haven’t been able to maintain the figures they did last year.”

Urban residential land sales are “slow,” a contrast which Mr Nestor attributes to labour and materials shortages in the building industry.

Due to better cash flow and growth, half of the 18 properties in Mr Edge’s portfolio are in regional areas.

When it comes to buying he recommends those entering the market don’t “sit on the sidelines” for six months, but rather act as soon as their finance is in order.

“People usually miss out on an opportunity waiting to see what happens,” he said. “Get a good mortgage broker to do the numbers and build a buffer in. Speak to local agents.

“Buy within your capability. Buy something for less than what your borrowing capacity is because it’s likely, if interest rates go up and the loan amount goes up, you may need a buffer.

“Instead of buying a three-bedroom house, you might need to look at an apartment, but at least you’re still getting into the market.”