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What to know when buying, holding or selling

Jul 16, 2022 |GODFREY DINH

As the property market’s momentum shifts, it can be easy to get distracted by the media noise.

As property investors, it’s vital to stick to your long-term strategy and filter out emotion from your decision-making.

Let's look at what the key stats are saying about the direction of the property market and what you should consider if you plan on buying, holding or selling.

  • The RBA faces the challenge of setting a ‘neutral’ cash rate that will keep economic growth at the right level. This analysis piece goes through five reasons why interest rates won’t jump as high as some have forecast.
  • Rather than a crash, economists are expecting Australian housing prices to follow the “soft landing” seen in New Zealand, where the cash rate was first lifted much earlier in October 2021.
  • A unit on Sydney’s lower north shore sold for $1.93 million, after its owner added a 3rd bedroom, costing only $8,000.
  • The cost to rent a room has jumped at an even greater rate than entire homes, according to the latest Rent.com.au data.
  • The national median price per room is $290 a week, up by 16% in the year to June 2022.
  • Compare that with the national median dwelling rent of $526, up by 9.5% during the same period, according to CoreLogic.
  • Overall confidence levels in the housing market halved to +29 points (from +58 in the previous quarter), according to NAB’s Residential Property Survey Q2 2022.
  • This score is still tracking above the average of +18 points, thanks to strong rental values.
  • Housing confidence for the next 12 months was:

- the highest in NT - set to remain at +100

- the lowest in NSW - set to fall by 6 points to its forecast bottom of +4

  • Housing confidence for the next 24 months was:

- the highest in NT - set to fall by 10 points to +90

- the lowest in TAS - set to fall by 19 points to +4

  • In 2 years’ time, sentiment in NSW & VIC is predicted to rebound to +8 and +18 respectively.
  • Property professionals surveyed by NAB expect prices in the next 1-2 years to:

- fall in NSW, VIC, ACT and TAS

- rise in QLD, SA, WA and NT

  • Property prices are predicted to increase the most in NT, with forecast growth at:

- 3% in the next year and

- another 3% in the next 2 years.

  • Rental values are tipped to go up across every state in the country, led by NT:

- 5.3% in the next year and

- 5.9% in the next 2 years.

  • The capital city with the highest gross yields is Darwin, at 6.04%.

- Houses: 5.58%

- Units: 6.71%

LOOKING TO BUY?

With more listings available, there's a greater choice of stock if you’re looking to capitalise on falling prices.

A buyer’s market means properties are generally staying on the market for longer, so there’s less pressure to make a rushed decision.

Avoid buying with the expectation that prices will surge as much as we saw in the past 2 years.

However, if we look at the above data points, NT clearly stands out for growth in market sentiment, values, rents and yields in the next 2 years.

For example, Darwin’s median unit price saw 1% growth in June 2022, or $8,519 value growth over the month.

To compare, the average full-time monthly salary is $7,595, according to the Australian Bureau of Statistics.

LOOKING TO HOLD?

Generally, it’s widely accepted that the longer you hold your property, the higher your capital gains are likely to be.

The median hold period for investors is 10 years, according to CoreLogic.
With vacancy rates at extremely low levels (1.2% across the country), the risk of your rental property making no income is very low.

Rents are up by 9.5% over the year and they’re expected to continue climbing in the next 2 years at least.

Rate rises will affect investors in different ways, depending on financial circumstances as well as the size and quality of their property portfolio.
However, rental growth will minimise the impact of rate rises to investors, likely until 2024.

LOOKING TO SELL?

Gone are the days where vendors were almost guaranteed a premium return across the board. However, quality properties will retain its value and will always be in demand.

Keep in mind that property markets are cyclical, so it’s normal, even healthy, to see a correction after a record boom. It’s an ideal time to review your portfolio’s local market performance and if it has dipped, assess how long it could take to recover.

Have a good, hard think about your exit strategy before you make a decision. If you’re not facing circumstances that are pressuring you to sell, then it may not be the best option to list your property at this stage of the cycle. Riding out the market slowdown may pay off in the long term.

Prices at a glance

Houses

Units‌

Overall, the rate of decline recorded across the capital cities over June 2022 for both houses (-0.9%) and units (-0.5%) accelerated at twice the rate of the month prior (-0.4% and -0.2% respectively).

Adelaide property prices showed the strongest overall growth in June of 1.3%. It has been the only capital city seeing a monthly growth rate of above 1.0% since May.

Sydney prices fell the hardest among the capital cities for both houses and units, though it is still recording annual growth across both property types.

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GODFREY DINH

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