What comes next?

As we edge closer towards the end of 2009 I think we may have seen the worst, but I don’t think that means everything is coming up roses.

The market is moving into a new phase which also means a whole new set of challenges.

Stock levels are plummeting. To date, new listings have dropped by 40 per cent. This is of major concern because together with other pending economic factors, such as looming interest rate rises, affordability will be the next challenge. It is likely that prices are going to be inflated by this shortage of stock and some potential buyers will again be squeezed out. This will also make it harder for real estate agents as the competition for new listings becomes tighter.

People will also start to find it difficult to borrow, banks have already started to tighten their lending criteria in preparation for interest rate rises. The cost and availability of money will be a big factor and it is likely to impact negatively on the participation of investors and developers, the two groups we really need to be more active at this time because they are part of the solution to Australia’s significant housing shortage.

We are also going to see the end of the First Home Owners boost at the end of this month and while first home buyer participation has already eased, it is still likely it will have some impact.

It will be interesting to see how these fundamentals come to play over the next few months. But there is no need for negativity or panic, there is just a real need to be prepared.