It’s an upgrader’s market with softer prices and more properties on offer. Dion Georgopoulos
Upgraders have overtaken aspiring home owners as the most dominant force in the housing market for the first time this year, spurred on by the slowing price growth and rising stock, a new poll by CBRE shows.
The share of home buyers buying bigger and more expensive homes increased to 64 per cent in the past three months, up from 59 per cent during the first quarter of this year, according to residential property valuers who took part in the survey.
During the same period, the proportion of first-home buyers had shrunk to 62 per cent, down from 66 per cent in the first three months of the year.
Sameer Chopra, CBRE’s Pacific head of research, said upgraders were likely to be taking advantage of falling home values in the country’s biggest markets and slowing growth in the medium-sized cities.
“If you’re an upgrader, now is a great opportunity to buy bigger homes in better locations because prices are softer and there is more stock on the market,” he said.
“There’s also a bit more certainty in the job market, as it remains strong, so people feel safe in their jobs and probably get a pay rise as well. So I think it’s almost a perfect condition for an upgrade.”
Nerida Conisbee, Ray White’s chief economist, said the rising affordability barrier for first-home buyers have likely deterred some from entering the market.
“House prices have increased a lot and if you are going in with a 10 per cent deposit, it’s quite difficult to get into the market now as a first home buyer,” she said.
“You will be up against other buyers who have bigger deposits, they have large equity behind them and are likely to earn more money.”
The latest ANZ CoreLogic Housing Affordability report shows that first home owners earning an average income of about $100,000 can afford just 10 per cent of all Australian homes, the lowest proportion on record.
Even high-income earners have drastically fewer options, with just half of the housing market affordable for those making an average of $172,000 gross income per year.
Behind upgraders and first home buyers, investors and downsizers were also active, but fewer developers and recent overseas migrants were buying.
“In the short term, until we get meaningful interest rate cuts, I expect upgraders and first home buyers will continue to dominate demand,” Mr Chopra said.
“Down the track, the downsizer and investor market could become more active once there is more confidence in demand and pricing.”
The prolonged period of high interest rates, rising home values and surging cost of living has also taken its toll on demand, the survey shows.
Only one out of three valuers reported strong demand in their respective markets, the lowest level so far this year and well down from the 54 per cent in the second quarter.
Rich Harvey, a Sydney-based buyer’s agent and chief executive of buyer’s agency Propertybuyer, said many buyers were sitting on the sidelines due to limited borrowing capacity.
“Buyers find it harder to enter the market because of lower borrowing capacity,” he said. “The current interest rate setting has dramatically reduced the amount people can borrow, so we’re seeing weaker demand.”
As such, fewer valuers expect house prices to rise next year. Only 55 per cent were optimistic about price growth, down from the peak of 78 per cent in the first quarter.
Just 18 per cent expect prices to increase by 5 per cent to 10 per cent, which is nearly half the 32 per cent in the first quarter.
More than a third expect prices to increase by up to 10 per cent across Perth, while 38 per cent predict the same growth for Adelaide.
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