It’s no secret that the last six months have been rough for Sydney home buyers and sellers alike. The Reserve Bank of Australia’s unforgiving spate of interest rate hikes, increasing almost every month since May, have disrupted the typically strong equilibrium of the Sydney housing market, but conditions in the coming months might not be as bleak as once predicted.
Over-inflation in capital cities is notorious for pitting baby-boomers against priced-out millennials, who are entering the market for the first time at the age of thirty-six on average, ten years later than first-home buyers were in the early 2000's according to Realestate.com.au. While a failing market might seem like an appealing opportunity for the millennial and emerging gen-z demographic to get a leg-up on their boomer competitors, the truth is that falling home prices are almost always a symptom of an ill economy.
The media’s forecast of worsening conditions has served to do little except exacerbate anxiety around buying and selling, but factors other than price will likely prevent young buyers from securing a deal according to ANZ Senior Economist Felicity Emmett; "Even if deposit costs, loan sizes and property prices are lower, the cost of servicing the mortgage could see buyers spending more money overall."
Data released by the Australian Bureau of Statistics (ABS) in late August points the finger at interest rate hikes for sharp decreases in market activity from first-home buyers. Lower borrowing limits and higher repayment costs have almost exclusively taken the blame, while a growing disparity between wage averages and the cost of living has seldom been considered; nor has the already over-inflated condition of the Sydney market compared to other national – and international – capital cities.
A softening economy seems to be the new accepted reality and predictions of every possible ramification for Sydney families are rampant in the news, but Mr Tim KcKibbin, the Chief Executive Officer of the Real Estate Institute of New South Wales (REINSW), has another opinion. “The buyer frenzy has obviously calmed, but the prices vendors are receiving are typically still well above pre-COVID levels,” he said. “Should rates go up again as seems likely, it will be more of the same in the weeks ahead: strong deals still getting done, accompanied by select commentators declaring a catastrophe.”
Mr McKibbin goes on to explain that the proportion of genuine buyers in the market now is very similar compared to the same time last year. While first time borrowers are still sensitive to interest rate rises, “Revenue NSW figures show there were over 19,000 transactions in July, from which the NSW Government collected over $981 million in stamp duty,” the REINSW reported.
These statistics are an encouraging sign that quality properties continue to trump market nuances and trends, and that eager buyers are still out there. Adrian Tsavalas, Director of Adrian William Real Estate, agrees that “while we are in a unique market, new and newly-renovated torrens title properties and larger family homes remain in high-demand.”
My Housing Chief Economist Dr Andrew Wilson offered some more promising intel to 9 News, remarking that buyer and seller activity has increased in recent weeks, a sure sign that the Spring selling season won’t be the doom and gloom predicted over the last several months. In fact, data released from Domain this month shows a steep and consistent incline in positive auction activity over the last three weeks. Auction clearance rates have been on the up-and-up according to Domain statistics, with Eddy Meyer for 9 News reporting, “They've increased 13.5 per cent across the country, but are up 16.5 per cent in Sydney.”
While we likely won’t see prices peak past January averages for a while, the news isn’t all bad. With surging renovation and building costs, developers seem to be holding their cards close to their chests for the time being, giving first time buyers and other owner-occupiers a better chance at purchasing successfully at auction. Felicity Emmett affirms the light at the end of the tunnel, saying “It is a significant decline but, by the end of it, prices will still be higher than where they were prior to the pandemic.”
Sources: here