When interest rates and house prices are rising, people become cautious. They wonder whether to buy and sell now, or wait for a better time.
The market may slow, but it keeps ticking over because there are fundamental reasons why people continue to buy and sell property irrespective of the state of the property market. These include death, divorce, downsizing… all these sorts of life-impacting things cause people to buy and sell houses no matter what is happening with interest rates, property prices or the economy.
But there are times when buyers are more likely to be considering their position; they might be looking at properties at a lower price point, or they may be finding ways to hold off buying or selling altogether. Currently, if you throw the time of year into the mix, you’ll find these are the things that buyers are considering now and as we head into 2024.
Along with the problem of housing affordability is the rising cost of living. It costs more to put petrol in the car, put food on the table and insure a house, and people are starting to take notice of that, especially as the proportion of household income required to service a new mortgage is now 46.2% – that’s a big number! And it’s now taking an average of ten years to save a 20% house deposit. Renting is not much better, with rental payments rising to 31% of the average household income.
What that all says is, right now affordability is the key that will play a huge part as we move into 2024.
With all that going on, we expected property prices to drop more than they have. But a housing shortage has put a price floor under the market and prevented prices from dropping as much as predicted.
Of little help is changes to the land tax laws coming into effect on January 1st 2024. Land taxes are applied to properties that are not the owner’s principle place of residence. The government is increasing the land tax by 0.1% for land valued at over $300K (land value only, not including the dwellings).
Also about to have an impact on many investors is the change to the threshold from $300K to $50K. So if you have an investment property with land valued at over $50K, in 2024 you will be pulled into the pool of people paying land tax.
The threshold change will affect landlords with lower priced investments such as one or two bedroom flats and units. We can expect to see these properties being sold by investors and bought by owner occupiers, so they won’t come back into the rental pool.
The combined hit of rising interest rates, increased living costs and government taxes means landlords are selling their investment properties as property investing becomes unaffordable for many.
So we can expect to see a lack of affordable rental properties continuing, and while we still have a housing shortage we can expect to see very minor house price decreases continue in Melbourne in 2024.
Chat to us about how a property advocate can help you sell or buy in the current market with confidence. Investment buyers can receive invaluable support and guidance through our Buyers Advocacy Service, and for landlords who are selling, our Vendor Advocacy Service helps vendors achieve outstanding results.
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