If nothing else the pandemic gave us time to ponder, to ponder our lifestyle, our habits and when lockups denied us our mobility, we were forced to find new ways of living and enjoying. Out of the restrictions came a host of benefits nonetheless being a surge in savings which when coupled with cascading interest rates produced a wave of new buyers at the bottom end of the market. Eighteen months ago, no one on this earth predicted anything but gloom with property prices falling by 20%. Whoops! Mr CBA, it should have been rising and by an even larger percentage.
But enough of the eloquence, lets now deal with some realism.
No market be it art, stamp, tulip, share or property has been able to sustain a 25% growth rate for much more than a year. To analyse the 25% growth rate of your property market, you need to split it into two parts. 15% was a re-rating of the residential property market. The focus of the family home has been more about the capital to buy and the gains to be got from owing it. But pondering added a new dimension – the intrinsic value of the family home and all to do with family. This intrinsic value of 15% is sustainable. The other 10% is due to irrational behaviour and once buyers sense the market is cooling that component will vanish in a flash. Any lenders who have supported loans of greater than 90% will suddenly be reminded of the risks of negative equity.
So what is going to cool the market. Well for a start it is already happening.
“Baby Boomers” (BB’s) control the largest supply of established homes in the market. For literally being “in the right place at the right time” the BB is now sitting on unheard of windfall gains. With the tax incentive of contributing $300,000 per spouse into super funds in the process of downsizing, BB’s will now be even more tempted to make the transition. But that is not the end of it. As at the 1st of July 2022 the qualifying age to capture the tax benefit in the downsizing process is being reduced from age 65 from 60. This means that there is going to be a block of 5 years of BB’s who can cash in on the recent rise and bring forward their retirement plans. It is undoubted that the sector of the market that has been holding up the Index for the last 5 years, the second time homebuyer, will be overwhelmed with choice and will have plenty of time to choose. It is highly probable that by the end of the year the unsustainable growth we have just enjoyed in the residential property market will be over.
From the concept of the “the home office” will emerge decentralisation that will ripple out from the CBD into the epicentres of the “burbs”. Cheaper rents (and parking), closer to home and offering a new concept in working is the way of the future. An example of an epicentre to the north is Port Adelaide where the neo “epi-precinct” of high rise offices will be filled with “hot desks” occupied by casually clad workers living within a 20-minute EV autonomous drive from the newest suburb in Roseworthy just 5km north of Gawler. To the south, Mt Barker is an epicentre certainty with feed coming in from low cost housing estates at Murray Bridge around to Strathalbyn. The redundancy of CBD offices will allow redevelopment opportunities into student accommodation and downsizing BB’s although a dose of clever architecture will be needed to meet the luxurious end of the latter. The Central Market development will lead the way in this CBD renaissance. Remember Adelaide in number 3 in the World Liveability Index and number 1 in Australia.
Out of the lockdowns of the pandemic adjustments to our lives and businesses were forced upon us by necessity. With little time to think and less to plan, change on the run became the dictate of survival. Home office, home delivery, home entertainment and less to spend it on developed a reappraisal of habitual habits and norms. Our future has been changed through the advent of a once in a hundred-year pandemic and the opportunities are not only innovative but numerous. Enjoy the rerevolution we are in.
To all of our clients and friends of Jackman & Treloar we thank you for your support during 2021 and wish you all a very Merry Christmas and a Happy and Healthy 2022.
Return to all posts