Great Ocean Properties Autumn Report

Welcome to our Autumn 2024 report. There is a lot happening in the world of property and as usual we will do our best to demystify what is happening.

There are many layers to the performance of Australia’s property markets and it very much depends on where you are, what type of property you own or what kind of property you want to buy.

In terms of macro sentiment drivers, there is general agreement that interest rates have peaked and the next move in interest rates is down. Opinions vary on the exact month but it’s likely to be sometime between August and November. As usual, economists opinions change from report to report and they alter their outlook as new data is produced, but that time frame tends to be the consensus.

What asset markets love more than anything is stability. The share market reacts more quickly than the real estate markets and at writing the ASX 200 is at all time highs. In real estate, it is the capital cities that set the trends and they have incrementally improved in recent months on the back of positive interest rate news and improved certainty.

For many reasons, incremental improvements rather than runaway prices, like we saw in the pandemic, should be welcomed. Property market participants, both buyers and sellers want a stable environment to make significant financial decisions. Of course every seller wants an above expected result and every buyer wants to buy fairly but both want to know that there is an active market that has a steady turnover so that both can proceed knowing that they can sell or buy without undue frustration. The interest rate trend has a significant bearing on this market stability and that is starting to be seen in most capital city markets.

With the discretionary coastal markets the macro sentiment drivers are very important. As a buyer, even if you are not borrowing, uncertainty and negative sentiment around interest rates can see many potential coastal buyers sitting on the fence until the future becomes clearer. We are now entering a period of more stability with the first tangible evidence being the rate pause in February. With recent economic news we expect to see engagement levels rise throughout the year and we are already seeing this with our web traffic numbers increasing.

What is shaping the coastal markets more than anything is land tax increases. This however is not a uniform concern. Although no one likes to pay land tax, it moves from an annoyance to quite concerning as the price points increase, given the threshold charging structure. Land Tax is charged on the value of the land of property that is not your Principal Place of Residence (PPR) and around the median prices on the Great Ocean Road it is not a huge concern.

It is however an issue as price points rise to the upper end of the coastal markets and it is having an effect on the amount of buyers in this segment of the market. Most of the properties we are selling above $3 million are for permanent homes or at least have the ability to be purchased that way. A common scenario is that a coastal buyer will have downsized in Melbourne from the large family home into an apartment and then buy a larger home on the coast which technically or in reality becomes their PPR. The apartment has a much lower land tax liability because of the smaller and often shared land footprint.

This is causing a separating effect in the market as to what buyers are attracted to and what is overlooked. Those properties that can be considered to be of a quality for permanent living or part of a lifestyle plan where the occupants would use it for large portions of the year, are attracting a bit more interest than a property that is obviously just a beach house, especially in the higher price points. This is something new and a direct result of Land Tax changes.

Moving forward we would expect to see the engagement levels of buyers increase as they feel more comfortable with the stable interest rate environment. An actual interest rate cut in early Spring would be ideal for the coastal markets and provide a significant driver. In the mean time we will see some early movers take advantage of current prices and make a move before the herd gets going later in the year. We saw this during the pandemic where the late movers paid more due to more people active in the market because of the simple human nature fact that everyone does what everyone else does.

We hope you found this update informative. If we can be of any assistance in any real estate matter please do not hesitate to call.