Which market segment will remain strong?
We all know that not all properties are created equal.
And while there are predictions that property prices will fall in the short term due to rising interest rates, the fact is the different segments of the property market will react differently to market conditions.
For example, the top end of the market, where luxury homes with multi-million dollar price tags belong, is reportedly seeing some softness. This means demand is starting to ease and prices may level off or consolidate.
In the US, the luxury homes segment is seeing the impact of a cooling market. Recent news reports showed the number of deals in the top end of the market is down by around 45 per cent from last year.
Here in Australia, there are also reports of a slowdown in the number of sales and auction activities in the luxury segment of the property market.
In the meantime, as buyers and investors go for more affordability and value, properties in the sub $1 million price range are becoming more popular among investors.
Flight to affordability boosts demand for apartments
In an earlier comment about major trends affecting the Australian property market, Domenic Nesci, co-founder at Wealthi, said the flight to affordability will take over the flight to space. This is because many home buyers and investors alike will opt for more affordable properties like units, apartments and townhouses rather than go for overly expensive homes.
“What we are seeing now are signs that people are shifting their focus on buying units and townhouses,” Domenic said.
“At the moment, people will tend to buy what is affordable to get an entry into the property market. Otherwise, they won’t be able to catch up as prices continue to rise,” he added.
Based on recent deals and contracts done by Wealthi clients, the flight to affordability and value for money is well and truly in place now.
Areas in high demand
For example, demand remains high for properties within the 20-30 kilometre range from the Melbourne CBD. Townhouses and units near or along the main transport lines are in high demand as migration opens up again.
In Sydney, areas in the Western Sydney region including Liverpool, Westmead and Casula are also attracting property investors.
In Perth, Lakelands (a suburb in the city of Mandurah) is getting a lot of attention from investors ready to take advantage of planned infrastructure projects in the area.
The same is true in Canberra where apartments in Woden are in high demand. A number of Wealthi clients who bought in Canberra over the past year already saw an increase in the value of their properties.
So, while news reports continue to paint a gloomy forecast amid rising interest rates, there are still many pockets of opportunities in the property market.
At the same time, as property buyers continue to go for value and affordability, the mid-tier and lower end of the market will remain strong.
If you would like to discuss the Australian property market in more detail, please reach out to the team to organise a time to have a conversation about how Wealthi can help you build a successful property portfolio.