By Charles Tarbey

The beginning of the year saw many parts of the country riding the wave of strong market conditions. However, as is the up and down nature of the property cycle, it appears change is entering the Australian market as 2016 creeps closer to an end. 

Of late, there seems to be much talk about predictions of increased unit supply and falling rental rates as early signs that markets will stabilise.

According to CoreLogic, combined capital city dwelling values rose 2.9% over the September quarter. Their analysis shows that this figure is heavily weighted toward the Sydney and Melbourne markets. Melbourne recorded a 5% gain over the third quarter, along with a 4.5% gain in Canberra and a 3.5% gain in Sydney. In contrast, Darwin experienced a decline of 4.5% over the same period, with the data continuing to show growth conditions differing substantially from region to region.

A stabilising market may not be immediately obvious in Melbourne, Sydney and Canberra. Spring listings in many areas have been met with eager interest and much of the property that is available is being snapped up, with almost frenzied demand in some locations.  

CoreLogic reports that Sydney’s clearance rates remained above 80% throughout September and Melbourne’s remained above 75%. These consistently high clearance rates may be suggestive of a strong market, however it is important to consider what's really influencing these conditions.

‘Averaged’ clearance rates may give the impression that all stock is going to move very quickly, but that may not be the case for some areas. Sellers would be wise to research local market conditions before listing and not simply rely on the headline numbers.

While some areas continue to experience strong market conditions, we are beginning to see some capital cities and regional areas really struggle. Some properties cannot be sold because loan amounts are higher than the value of the property in question.

Markets such as Western Australia have been struggling for a while now. Vacancy rates are high, sitting around 9% and the rental income of investors has subsequently been impacted. The low interest rate climate is helping many property owners hold on to their homes.

I recently spoke to agents on behalf of the Real Estate Institute of Western Australia, reminding them that they are now leading the way in the change that is creeping across Australia. Property in Western Australia has been significantly impacted by a slowdown in mining activity.

In the rental market, the CoreLogic August Rent Review reports rental rates across the country are continuing to drop. This is a positive for tenants, as combined capital city median weekly rents are sitting at $481 per week, which is the lowest rate since November 2014. Landlords may wish to prioritise retaining valuable tenants.

My key observation of the market at the moment is that there are markets within markets and headline results, in a sense, can’t be trusted. While some areas continue to experience strong demand for property, other areas are experiencing sharp declines.

Record low interest rates may soften the landing for the property market with cheap debt likely to continue to incentivise many people into the market.  

While it is expected that interest rates will remain low for some time to come, there is no guarantee rates will not rise in the future and those who over borrow now may face difficulty in the future if they are not careful.  

If you are looking to borrow, it will be essential to pre-determine a budget and stick to it. While some contingency could be allowed for a great property, avoid letting emotion or impulse push you too far outside these financial constraints. For those who are currently paying off their mortgages, consider the value of reducing your current debt to strengthen your financial position.

The thought of stabilising markets can be met with unnecessary alarm by some. I encourage a level head when approaching property over the coming months, ensuring careful contemplation and seeking professional advice to ensure you weigh up all your options. An informed decision will help you to make the most of your property transactions for the remainder of 2016 and into the New Year.