Australia’s housing slump will bottom out soon, with the combination of natural pent-up demand and the return of moneyed expats expected to boost the property market, according to a real estate veteran.
The statement followed the release of ASX-listed McGrath’s half-year results, which showed a statutory net profit after tax of $1.8 million for the half year, down from $6.9m in the prior corresponding period, reflecting challenging market conditions.
“While the economic climate and impact of further interest rate rises is difficult to predict, we think we are either at, or approaching, the bottom of this property cycle,” John McGrath (pictured above) told The Sydney Morning Herald. “Our view is the next stage of the market will be a consolidation, featuring a plateauing of prices, followed by further upward growth in property values in 2024.”
McGrath’s chief executive said there were already signs, based on weekend auctions, that buyers believed interest rates were nearing their peak, which in turn, was sending them back into buying properties.
Domain data showed that auction clearances in Sydney over the weekend were 75% in Sydney and 63% in Melbourne.
“If you went to any of our auctions or opens on the weekend you would have seen there is no problem with this market,” McGrath said. “There is a shortage of stock … which means people feel we are getting closer to the top of the interest rate cycle, and they are factoring in one or two more rises, they are doing their sums on that and buying because they are getting a discount to what they would have paid 18 months ago.”
McGrath’s predictions were based on historical evidence that cycles in “downward legs” last for about 18 months.
“We’ve been in this [cycle] now for 15 to 16 months and I think, on average, they last six to seven downward legs and have historically been down 8% to 9%,” he said.
McGrath said most markets saw selling prices corrected by 10% to 15% from their peak in late 2021 while volumes slipped by at least 20% in the spring selling season, compared with the corresponding period in 2021, SMH reported.
“So, looking at historical data it would suggest we should be at, or near, the end of the downward cycle, and if you look at what’s happening in the street at the moment, there is plenty of demand,” he said, adding that overall, “we will look back and more than likely say the bottom could be sometime this year.”
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