Investors ready to strike when cash rate steadies

After observing how people reacted to the brief pause in rate hikes after the April meeting of the Reserve Bank, the trio believe that buyers are ready to pounce as soon as the rate rises appear to have hit a ceiling.

Noting that while “no one can predict the future”, Mr Kumar said that a perception exists that the RBA is getting close to ending its tightening cycle and will soon be content to hold rates steady.

At that point, he opined, investors would be ready to make moves.

Even during the April pause, he said that agents received an uptick in interest due to the perception of rate rises slowing.

“Talking to all the real estate agents, their phones have been ringing hot because there seems to be a degree of certainty in the market now, and people thrive on certainty,” Mr Kumar said.

“And so, [investors] have been sitting on the sidelines, and now that there’s a little bit of supposed certainty in the market, they’re jumping back in”.

Increased activity would soon push up prices, he noted, given that supply looks to be an issue for long into the future.

“We already have an undersupply issue; if you look at listings from this time last year, we’re down by 21 per cent. So, when more players are jumping in looking for properties, automatically, it pushes the prices up. And we are starting to see that in a lot of listings where the prices achieved are above the listed price, or they’re going to best offers or even auction results where they’re hundreds of thousands of dollars above the reserve mark,” Mr Kumar said.

Mr Tarrant also agreed that “once we are at a point [where] it’s not going up any further, that’s when mindsets and attitudes change, and that obviously has impacts and ramifications on what happens to property prices”.

And Mr Waters added that even the perception of the tightening cycle beginning to ease had pushed a particular type of buyer back into the market: fear-of-missing-out (FOMO) buyers.

“We’re certainly seeing it on the ground in terms of competition: there is the smallest element of FOMO starting to creep into the market. Now, it’s not to the point of during COVID, where [it seemed like] you could sell a portaloo on your front yard for a million dollars, but just a slight amount of, ‘Well, I don’t want to miss out,’” Mr Waters said.

But even with that motivating factor, Mr Waters also advised that a bottleneck ahead could put the brakes on for even the most hungry buyers.

As Mr Waters explained, when rate rises appear to pause, the perception that prices will then begin to rise might make some potential vendors hold their properties back, anticipating big gains if they wait a few months.

Mr Waters advised: “[Sellers are] saying, ‘Well, market’s up, consumer confidence is up, maybe I’ll hold off selling because the market is starting to improve, and as it improves, obviously more money in my pocket as a seller’.

“And so, there may be the case where there’s less stock on market over the coming month or thereabouts as confidence improves.”

Listen to the full conversation here.