Sydney house prices are down, but not out, new data reveals | Kanebridge News
Kanebridge News
Share Button

Sydney house prices are down, but not out, new data reveals

Australia’s most expensive city feels the impact of successive rate rises, but it’s not alone as prices trend downwards around the capitals

By Robyn Willis
Mon, Oct 24, 2022 9:43amGrey Clock < 1 min

Sydney house prices have fallen more than 10 percent since February this year, CoreLogic reports.

The property data service revealed that Sydney home values are down -10.1 percent, or $116,500. Research director for CoreLogic, Tim Lawless said as Australia’s most expensive capital city, it was ‘unsurprising’ that Sydney had experienced the greatest decline following six consecutive rate rises and record low affordability this year. 

“Although Sydney’s housing values were already in decline when the rate hiking cycle began, the pace of decline accelerated sharply following the first interest rate increase in May,” he said.

“Sydney values are now down –9.5 percent since 3 May, and -10.1 percent since peaking on 13 February this year.”

Melbourne property prices have also fallen this year at -6.4 percent since January. The results were similar in Brisbane, which has experienced a -6.1 percent decline. In Hobart and Canberra, the monthly Home Value Index revealed falls of -4.7 percent and -4.4 percent respectively.

Results were steadier in Adelaide and Perth, where prices have fallen less than -1 percent since peaking in August. Darwin is the only capital where prices have not declined.

Despite the bleak results in Sydney, Mr Lawless said there’s no need for concern just yet.

“Despite the -10.1 percent decline so far, Sydney home values still have a way to go before wiping out the capital gains accrued over the recent growth cycle. Home values would need to fall a further -11.4 percent to get back to the levels seen at the onset of COVID,” Mr Lawless said. 

MOST POPULAR

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

Related Stories
Property
Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market
By WILL PARKER 23/11/2022
NSW
Swanning by the park in Sydney’s west
By KANEBRIDGE NEWS 23/11/2022
Property
U.S. Home Sales Fell for Ninth Straight Month in October
By NICOLE FRIEDMAN 22/11/2022
Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market

Buying activity by companies fell in line with the decline in overall home sales amid higher borrowing costs

By WILL PARKER
Wed, Nov 23, 2022 3 min

Investor buying of homes tumbled 30% in the third quarter, a sign that the rise in borrowing rates and high home prices that pushed traditional buyers to the sidelines are causing these firms to pull back, too.

Companies bought around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter, compared with 94,000 homes during the same quarter a year ago. The percentage decline in investor purchases was the largest in a quarter since the subprime crisis, save for the second quarter of 2020 when the pandemic shut down most home buying.

The investor pullback represents a turnaround from months ago when their purchases were still rising fast. These firms bought homes in record numbers last year and earlier this year, helping to supercharge the housing market.

Now, investors are reducing their buying activity in line with the decline in overall home sales, which have slumped with mortgage rates rising fast. But with investors’ large cash positions, and with big firms such as JPMorgan Chase & Co. planning to increase its exposure to the home-buying business, investors are poised to resume more aggressive buying when rates or home prices begin to ease.

These firms have seized on a pandemic-driven rise in demand for houses in suburban areas. These owners rented out the homes and increased rents on homes by double-digit percentages. By the first quarter of 2022, investors accounted for one in every five home purchases nationally.

But ballooning borrowing costs have kept investors from buying as much recently, said John Pawlowski, an analyst at Green Street. Buyers and sellers are also agreeing less often on pricing, stifling sales.

“It leads to a lot of people just putting down the pen,” Mr. Pawlowski said.

Rent growth has also begun to slow. Rents for single-family homes rose 10.1% year over year in September, down from 13.9% in April, according to housing data firm CoreLogic.

That rate of growth is still very high by historical standards, however, and much stronger than in the apartment market. Multifamily rent increases are now much lower by most measures. Near record-high rental prices are failing to attract as many new tenants, and demand in the third quarter fell to its lowest level in 13 years.

Demand for rental houses has held up better, in part because many of these homes are leased to relatively high-earning people who have found the for-sale market too expensive to buy, some analysts say.

That rent growth for single-family owners hasn’t translated into stock-market gains this year. Investors have lumped these owners in with home builders and sold many of them. Shares for the three largest publicly traded owners, Invitation Homes, American Homes 4 Rent and Tricon Residential, are each down more than 25% year to date, underperforming the S&P 500 over that period.

Rental landlords also face headwinds from rising property tax assessments that have come alongside enormous increases in home-price appreciation.

At the same time, large rental landlords are coming under greater scrutiny from federal and local governments. Congressional Democrats have hosted a series of hearings focused on eviction practices and rent increases. Three Congress members from California this month introduced a bill called the “Stop Wall Street Landlords Act,” which proposes levying new taxes on single-family landlords. It would prevent government-sponsored enterprises like Freddie Mac from acquiring and securitising their debt.

Many of the places where investors have eased purchasing are the same cities where they had counted for an outsize share of total sales. That includes Las Vegas and Phoenix, where investor sales dropped more than 44% in the third quarter compared with a year ago.

Fewer purchases by online house-flippers, or iBuyers, may have contributed to those declines, according to Redfin. Redfin decided to close its own home-flipping business, RedfinNow, earlier this month.

Nationally, investors still accounted for 17.5% of all home sales in the third quarter, a higher share than they held at any time before the pandemic, by Redfin’s count.

That share seems likely to rise again. Builders with unsold homes due to widespread cancellations by traditional buyers have been looking to sell in bulk to rental landlords.

Meanwhile, some institutional investors are now readying large funds to snap up homes. J.P. Morgan’s asset-management business said this month it had formed a joint venture with rental landlord Haven Realty Capital to purchase and develop $1 billion in houses. A unit of real-estate firm JLL’s LaSalle Investment Management, in partnership with the landlord Amherst Group, said it plans to buy $500 million of homes over the next two years.

Tricon has nearly $3 billion it plans to tap to buy and build homes. “We will lean in and deploy that capital when the time is right,” Tricon’s Chief Executive Gary Berman said on a November earnings call.

While a recession could bring down borrowing rates, it would likely be accompanied by higher unemployment, making it difficult for traditional buyers to take advantage, said Daryl Fairweather, Redfin’s chief economist. For investors, however, that could offer an opportunity to acquire homes at favourable prices.

“An investor may have more resources to jump in at exactly the moment when rates decline,” Ms. Fairweather said.

MOST POPULAR

What this ‘median’ 7-figure price tag scores across Australia.

An influx of people could calm future volatility.

0
    Your Cart
    Your cart is emptyReturn to Shop