THE RIPPLE EFFECT - A BUYER AND SELLER PERSPECTIVE
Over the last three months, we’ve seen stable interest rates (finally), but there's still whispers of possibly one further rate rise in 2023. Add the tightened bank serviceability criteria for loan approvals, subtle changes are underway in the market as we head into the Spring market in 2023.
Let's take a quick dive into what these dynamics mean for buyers and sellers.
Buyer's Perspective
Current Purchasing: The recent stability in interest rates has meant more predictable borrowing capacities. However, this has been slightly offset by stricter bank lending criteria, which has played a role in the reduce the amount some buyers are approved to borrow.
The Serviceability Maze: With banks implementing stricter serviceability criteria, prospective homeowners may find the lending process more challenging. This could mean producing more documentation, proving higher levels of income, or demonstrating more significant savings – all potentially prolonging the approval process.
Confidence and Caution: While steady rates boost confidence, the combination of any headlines around potential rate hikes and stricter lending protocols are leading to a degree of caution. Buyers are tending to be more conservative in their property choices while expecting to negotiate harder on prices.
Seller's Perspective
Demand Dynamics: The demand rises along with a sense of urgency as buyers are keen to lock in their purchase before they have to apply for a new pre-approval which would potentially be at a lower amount. However, the tightening of lending criteria also means fewer buyers qualify for loans, leading to a potential dip in demand down the line making it a vicious cycle.
Price Adaptations: With fewer buyers qualifying for substantial loans, sellers might be compelled to adjust their pricing strategies. Homes in the mid to lower price range could see increased demand, while luxury properties are facing longer days on market and potential price reductions during their campaign.
Strategic Timing and Marketing: In light of these complexities, sellers need to fine-tune their selling strategy. This might mean timing the sale to tap into immediate demand or emphasising particular property features that justify a higher price point, especially given the tighter financial constraints buyers face. It is also vital that the marketing strategy and tools used during the campaign need to be getting the property in front of the largest audience of buyers possible.
Not sure what timing & strategy will work best for you? Book a marketing consultation
In Conclusion
The housing market is a complex web of interconnected elements, and the recent stability in interest rates is just one piece of the puzzle. With the potential of another interest rate hike before the end of 2023 and tighter lending criteria coming into play, both buyers and sellers must remain nimble and informed.
For buyers, it's crucial to assess their financial standing thoroughly, understanding how the new lending criteria might affect their borrowing capacity. Sellers, on the other hand should stay current with market demand shifts, adjusting their strategies accordingly.
In this ever-evolving market, collaboration with experienced financial and real estate professionals remains key. As 2023 continues to unfold, the market will require sellers and buyers to be both proactive and reactive, ensuring they make decisions that stand the test of time.
Got Questions? Book a Call