Spring — A Stalled Seller’s Market
Does the roadmap out of COVID mean spring selling will finally get underway?
Does the roadmap out of COVID mean spring selling will finally get underway?
Spring may have sprung — but Australian property’s most important residential selling season has yet to bloom.
Despite well-documented records tumbling across the country the past 12 months, all eyes were set on spring and what September would deliver, especially given the moving lockdowns that framed the key metro markets of Sydney and Melbourne.
Predictions are often fraught with miscalculations, however with the end of lockdown now in sight for Sydneysiders and the wider country pushing towards an eventual ‘reopening’, what’s in-store for the remainder of the so-called selling season?
Adrian Kelly, president of the Real Estate Institute of Australia thinks that history is bound to repeat itself.
“Last year when the lockdown restrictions were lifted, all markets bounced back with a vengeance due to all the pent-up demand from being unable to list,” said Mr Kelly. “The same will happen this year as demand is still incredibly strong, coupled with low supply.”
Demand, he adds, continues to drive interest on the back of diminished stock levels.
“Despite the low interest rate environment, we aren’t seeing the usual new properties coming to market. In fact, spring listings are down by a staggering 20% across the county.”
Dr Andrew Wilson, chief economist My Housing Market, also believes in a market reset.
“They’re [lockdown measures] a bit like pressing the pause button on the market. What we do is understand where markets were prior to lockdown, where they were heading, and then once we get over the speed bump, understand that they’ll take off from where they were when the interruptions occurred,” said Dr Wilson.
Not all markets are created equal and while Melbourne faces a taller task in returning to a level of ‘normality’ — with agents only recently able to again show properties in person — signs are positive.
after a slow start to spring the Melbourne market, with listing numbers reaching a recent low in the first week of September, the trend has surged 48.5% in the last rolling four-week count, according to CoreLogic, with restrictions on property inspections lifted.
A look at last weekend’s auctions results further heralds an ascendent return.
Despite a dramatic halving of listings — 269 auctions compared to the previous weekend’s 434 — Melbourne’s clearance rate remained strong at 79.3%.
According to My Housing Market, Sydney claimed a clearance rate of 85.2% — its eighth consecutive weekend over 80% — across 641 listings with a median sale price of $1,744,000 for houses sold at auction.
Dr Wilson believes a true Sydney surge, like that in the early part of this year, will be seen as the markets open up.
“As a consequence of a lot of buyer demand having been satisfied and affordability falling, we won’t see the same surge that we’ve had previously this year, but we’ll still see prices growth nonetheless,” said Dr Wilson
“We’re heading, if we finally get there, to sort of more of a normalised environment for house prices, which I believe will grow over the long-term at 3% to 4% a year in major markets [Sydney and Melbourne] even though we’re going to see a 25% increase at Sydney median this year.”
Despite the positive spring predictions and recent upticks, both key metro markets remain prohibitive for first home buyers. It’s a situation Dr Wilson only sees worsening, his data from My Housing Market claiming the number of first home buyers down the last six months in a row, from March to August, for the first time since the 2009 GFC recovery.
“First home buyers are virtually collapsing at the moment and they don’t have a number of those stimulus packages which were also helping them last year. They’re not as significant, those support packages for first home buyers, either at the national level or at the state level,” added Dr Wilson.
As for the shadow cast by talk of a recession? Mr Kelly points to such previously being overcome.
“There is a big difference with the recession we saw during the GFC to the recession we may see this year. And that is that the GFC at the time didn’t seem to have any end date, hence the uncertainty. This time around, we can see an end date approaching of sorts and that obviously revolves around vaccination rates and lifting of restrictions,” said Mr Kelly.
While Dr Wilson agrees in regards to the strength of the property market he concedes there’s little government intervention to offset the effect of an economic downturn.
“We’re certainly closer to a real type of recession over that because we’ve got two big economies in Sydney and Melbourne involved this time… We don’t have the same level of stimulus from the government to offset it [recession]. Economic downturns don’t really affect the housing market. Now, the reason behind that is because they’re usually offset by stimulus in monetary policy.”
For Mr Kelly, the advice upon entering what is the property market’s most important season is to research heavily, have finance approved and not fear looking further afield.
For Dr Wilson, a more cautious approach is recommended.
“It’s still a seller’s market. And the data continues to show us that … sure, there aren’t as many buyers around. But at the same token, there aren’t as many sellers around to force competition.
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Amid looming rate rises, there are reasons to be cheerful as mortgage holders head into 2023
Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.
Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.
The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.
Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.
Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.
“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said.
“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again.
“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”
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