Bill Evans is the soon-to-be chief economist for Westpac Bank. Each year, the Geelong Chamber of Commerce hosts the Westpac Economic Breakfast. For the last 19 years, Bill has been the keynote presenter – he draws big crowds at his presentations across the country.
This year, given the vulnerability of the property market here in Geelong, his predictions about what is to come in 2024 and into 2025 are of particular interest to anyone who owns property or is looking to buy and become a property owner within our Region.
A standout point for me was a throwaway line, but one of relevance to be mindful of in Geelong. and I quote “I do not predict the Geelong market”. Bill’s presentation was for the majority based on national or capital city figures and commentary. We also need to consider the local market and how this differs from the national overview.
Like mainstream media, Bill is predicting an increase in property values for the remainder of 2023 and into 2024. He suggests that the market has bottomed out and is on its way back up – slowly, and it will take some time, especially for regional areas that have had a considerably higher ‘fall’ than the capitals, but improving all the same.
Considerations moving forward include:
- Whilst low-income earners have worked through their savings, the higher-income earners are still spending. Older people are investing in assets in 2023 firstly through purchasing investment properties and secondly through money recycling. The money recycling comes in the form of what Bill refers to as the “bank of mum and dad”. This refers to parents financially supporting their children to get into the property market by providing capital for deposits. Deposits being placed down in proportion to the total loan amount are increasing because of this.
- House prices will turn around considerably more in Melbourne than regional Victoria due to the massive growth in regional areas during COVID times.
- Changes in the Reserve Bank of Australia structure along with a decrease in meeting schedule from the current 11 per annum to 6 may impact how decision-making and frequency of interest rate changes as of the start of 2024
- Interest rate drops and tax cuts in the second part of 2024 and moving into 2025 are predicted to provide positive sentiment for property purchasers.
- There may be an increase in discretionary sellers in 2024/25.
Bill’s predictions support an easing of pressure for household and property value increases and as mentioned above, the national media is mirroring such suggestions. Bill also recognises that currently, many households are in the thick of tough times with the following considerations pointing to a pessimistic mindset with 76% in this negative sentiment.
- Currently the ‘Tax Drag’ is most concerning for the household sector, combined with challenges with interest rates. Those earning between $40,000-$200,000 are currently being taxed at a rate of 32%.
- Pressure on households is now showing up via negative retail sales and a decrease in credit/debit card activity.
- Minimal topping up of offset accounts has been observed and concerns about fixing home loans at close to 6% are worrisome.
- During COVID the average saving rate, as a proportion to income was 24%, the average in non-covid times is 4.6% and currently, we sit at 3.7%.
- Troubles with building supply with approx. 50,000 residential builds across the country started but not finished.
- Surging building costs and major disparities between builds that have been council approved versus builds that proceed.
- The fixed interest rate cliff is expected to peak between now and mid-2024.
The media tends to report the highs and the lows. This is what sells and creates headlines. Highs and lows frequently are determined by national or capital city real estate data. Terry Ryder, Real Estate Analyst, suggests that micro real estate markets exist right across Australia. He warns consumers to be mindful of applying the national headlines and data to their own suburbs. In support of such warnings the Real Estate Institute of Victoria reports that for the last quarter, there have been 134 suburbs across Victoria reported positive growth while 155 reported negative growth. Another suggestion is that niching down your suburb/area data and looking beyond national headlines is critical.
Data reported on the City of Greater Geelong website tells us that over the last 10 years, Geelong property values have increased a whopping 88.5%, that’s 6.5 per cent on average per annum. However, more recently, the median sale price for The City of Greater Geelong at the end of the June quarter of 2023 was $735,000. This contrasts with the end of the March 2023 quarter and the end of June 2022 (see table below), showing a drop of 10.1%, not in line with the national headlines.
|End of June 2023||End of March quarter 2023||End of June 2022|
What will be interesting to note is how the September 2023 quarter will track when its data comes in. Due to the delay in data, it is important to have an excellent understanding of what is happening throughout a given quarter if you intend to transact in the local property market. Some of the ways to ascertain this information are to consider average values not just each quarter but month to month, weekly sales results, explore and compare average days on the market and collect anecdotal data from Real Estate Agents who are in the thick of the market day in and day out. Another option is to engage an independent valuer to provide a property valuation report.
Anecdotally what we at Kardinia Property are observing in Geelong currently is the following:
- On average, days on the market have increased. In October 2021 across Geelong, it was 19. At the time of writing this report, Realetate.com.au reports average days on the market for Corio is 34 days, East Geelong is 49 days, central Geelong is 58 days and Mount Duneed is 34 days.
- Whilst the number of properties on the market appears to be increasing, overall across the area (just in the last couple of weeks) It seems that discretionary sellers are more likely to hold than sell.
- Pricing of properties is highly sensitive with sellers needing to be reactive to the market conditions and take feedback from the buyers seriously.
- Property owners who are willing to sell only if the right person comes along with a big price are being disappointed, buyers are starting to have more stock to choose from, less funds and less competition.
- The number of buyers for a particular property appears to be less however the buyers that do come along appear to be more qualified and ready to act.
- Sellers seem to be moving away from using Auctions due to the higher risks including not finding a buyer or if they do, the risk of not reaching reserve levels.
- There are still buyers moving from Melbourne, commuting to Melbourne to work who are seeing Geelong as an affordable outer suburb of Melbourne.
At his presentation this time last year in Geelong, Bill predicted that 2022 would see a fall of 7% which was fortunately not in line with the actuals. Bill has forecasted 2023 to have an overall gain of 7% and in 2024 growth of 4%. We all have our fingers and toes crossed for the gain in 2023 to be accurate.
It is not all doom and gloom for the Geelong property market, however with the changes in the Consumer Price index, interest rates, and personal tax cuts on the cards for late 2024 and into 2025. As mentioned earlier property prices in Geelong over the last ten years have risen by 88.5%, a great return. The property market is on average, a ten-year cycle so if you are in it for the long haul the outlook is certainly positive.
For those who are considering short-term transactions, our advice is to do your research and dig down into the suburb or even street you are considering buying and selling in, talk to local experts and most importantly transact when the time is right for you.