Even as house prices continue to fall nationwide, homes are not selling as fast as they once were.
House prices have fallen for six months in a row, according to Cotality. The research firm recorded a -1.1% drop in property values in September, with many capital cities recording even bigger declines.
Against this backdrop, fewer existing homeowners are rushing to put their properties on the market. But even with fewer listings, the number of homes sitting unsold is also climbing. Total housing stock for sale was up 23.1% in September, compared with a year ago, according to Cotality, illustrating how would-be house shoppers are taking longer to move, despite the apparent buyers' market. Capital city homes are also taking longer to sell: a median 39 days, up from just 23 days a year ago.
So why are would-be homeowners hesitant to buy, even as prices fall?
According to brokers, the answer largely comes down to psychology: buyers are reluctant to take the plunge as their anxiety over another market downturn grows.
"First-time homebuyers are just so naturally scared even without the prices falling. And now the fear for them is that they don't want to catch a falling knife, have negative equity within a short period of time, because they don't know when prices will stop falling," Luke Ashby, finance specialist and mortgage broker at Emerge Finance, told Australian Broker.
"First-time homebuyers, they're scrolling on their phones; they're seeing it on the news. They're seeing all this doom and gloom around the property prices, and they're just too scared to take action," the Brisbane-based broker continued.
Nerida Conisbee, chief economist at Ray White, added that many market participants are "trying to time the bottom."
"I think the problem is that buyers don't like markets where prices are falling, and as a result, we tend to see pretty low levels of activity until people start to feel that it's reaching a plateau," the economist explained. "It's just people's psychology that when prices are falling, they don't want to get caught paying too much for a property. And as a result, they just sit on the sidelines and wait."
Fall house prices come amid four interest rate hikes this year, reduced borrowing capacity, continued inflationary pressures and general market uncertainty.
"There's a multitude of factors causing the market to create fear," said James Green, director and finance broker at Flint Group Brisbane. "You've got the rates, the negative gearing, the capital gains changes, coupled with the headlines of how much property prices are dropping. As an individual, if you're looking and consuming the media, then 100% if causing fear. And there are fewer people going to open homes. There's fewer people transacting on property [on average]. Some banks have dropped in terms of their volumes. A lot of people go into purchases at the moment — people are looking at the media — and there's a lot of fear involved and they're just deciding not to transact."
Brad Duggan, chief executive officer of Melbourne-headquartered Metricon Homes, Australia's largest residential home builder, added that "the commentary we’re hearing is eroding confidence and making some buyers question whether owning a home is even possible anymore.
"In Victoria, we are seeing confidence reaching a very low level," he continued. "We have almost lost our mojo here. The demand is still there but many people are choosing to sit on the sidelines."
Complicating matters, additional declines may be on the horizon.
On Thursday, Cameron McIntyre, chief executive officer and managing director of digital property giant REA Group, warned that prices could continue to slide in the coming months. REA Group is the parent company of Mortgage Choice, Athena Home Loans, data services firm PropTrack, and property platforms realestate.com.au, flatmates.com.au and property.com.au, among other brands.
"Interest rates are the biggest factor contributing to market uncertainty at the moment," McIntyre told shareholders, during the firm's general meeting. "Further price falls are likely over the coming months as last week's interest rate rise, tax changes and the cumulative impact of higher borrowing costs weigh on buyer demand."
While falling house prices may be unwelcome news for existing homeowners, they also create new opportunities for aspiring buyers, particularly first-time home shoppers who may have previously struggled to get on the property ladder.
"It's the market that many borrowers have been screaming out for, for a long time," Ashby said. "Many of the first-time homebuyers who couldn't afford to get into the market six months ago, they're now looking at the reality of perhaps it is a possibility now. And if you think about it and have a look at the fundamentals as to why you'd buy and have homeownership, then it starts to make a bit more sense. It's the best window I've seen in six years.
"If borrowers actually think about it and stop looking at the news headlines, there's all these different reasons why homeownership is worth exploring right now," the broker continued. "You've got rents going up at a pretty rapid rate right now and it's likely to only continue given the shortage of housing that we've got. And as a first-time homebuyer, you're not buying it to then sell in six months. You're often buying that home to live in it for at least two, three-plus years. So if you're holding it for the long term, now is the perfect time to buy. And if it's a long-term decision for — which property is, if you're holding it for a decent amount of time — that's where you'll see the growth.
"It's just more important than ever for us to be educating our clients, so they can actually take the time to understand and digest [the information]," Ashby added. "The ones that do understand it, they're the ones who are actually seeing it as a great opportunity."
Green agreed that "in terms of the purchasing side, at the moment, there is probably some of the best buying I've seen in a long time.
"The way I'm looking at it is through education and understanding and getting the right professionals in my clients' corner," the broker explained. "The right educated people with the right advice and professionals in their corner are taking advantage of the market."
