The property market is reactive but not very liquid, as selling a property takes time. Unlike the stock market, it avoids reactive pressures and short selling.
PRP research shows inner Geelong properties sell in an average of 31 days. Affordable suburbs like St Albans Park sell within 18 days, Whittington in two, and Newcomb in 23. In contrast, pricier areas such as Newtown take 49 days and Manifold Heights takes 41 days. Growth areas like Armstrong Creek, where the median price is $630,000, see sales averaging only 25 days on market.
Some days on market results have been distorted by the number of homes bought by buyer advocates. Some agents report that three out of five homes sold are purchased by a buyer’s advocate.
These advocates, sometimes buying homes sight unseen for mystery investors, have plagued our region. They force out many would-be owner-occupiers and local buyers. As a mostly unregulated industry, their presence is leaving a mark on the market.
In one case, a single buyer’s agent reportedly purchased more than 60 homes across three northern suburbs in under four months. This single agent has helped push up the median house price in both suburbs, distorting values.
Since the start of the Iran conflict and the rise in oil prices, the market has seen a significant decrease in demand. Average clearance rates are now only 51 per cent, well below the high 60s seen in February.
With the recent rate hikes returning us to the 2024 interest rate peak, we can expect a further slowdown in demand.
These interest rate increases now have a double whammy impact when coupled with fuel prices that are putting pressure on living expenses, further reducing people’s ability to afford a loan.
This slowdown is reminiscent of a similar short-term slowdown in 2018. Back then, the slowdown was driven by a credit-tightening event. The government-imposed caps on investor lending, limits on interest-only loans and stricter serviceability assessments.
These changes reduced the borrowing capacity of many would-be buyers and what followed was a period of uncertainty that slowed the market to a crawl and crashed clearance rates.
The core underlying growth statistics and fundamentals where still strong, and by late 2019 the market had more than recovered. We then entered one of the fastest growth spikes on record.
This time we have fiscal tightening pressures driven by the Iran conflict and the associated inflation spike, leading to an RBA cash rate peak. Fortunately, the fundamentals again are strong.
First, Geelong has featured in the 20th edition of the World Wealth Report as one of 10 districts expected to outperform in the next five years.
Second, our region is the fastest-growing region in Australia, for the fourth quarter in a row! Our region is expected to reach a population of 335,000 by 2030, which is only four years away.
Third, Geelong is now seen by many as a ‘secondary city’: a satellite metro of Melbourne, but with greater affordability and lifestyle options.
Fourth, the big boys are already on the move with developers such as Gurner, Mono and others announcing developments in the Geelong region. These guys are the property equivalent of Warren Buffet, and when they move, the market is never far behind.
I am more convinced than ever that the Geelong region market is entering a small slowdown, which will last perhaps till the November election, followed by a sharp recovery and a strong steady growth lasting well past 2030.
Before this happens, there will be opportunities to make the most of the slowdown. This is an opportunity to pick up property at more subdued pricing if you can get it.
Do not let this current market slow you down. Stay focused and be ready to pounce when a worthwhile opportunity arises, especially if you can hold through the recovery period.
Prepare yourself now so you can move with confidence when market momentum returns, seize the window to acquire valuable properties before the next upswing.