Firstly, Welcome to another version of Covid lockdown, this time, ‘with a twist’.
We have noticed an increase of this terminology ‘with a twist’ popping up all over the place as businesses are more adjusted to the lockdown environment (those able to trade that is) are ‘still open, with a twist’. While caf s and restaurants have evolved around the restrictions, so too have Real Estate businesses, meaning the steamrolling Sydney market is able to continue moving forward during lockdown, or is it? Discussed below in ‘local market’.
Some very interesting and conflicting articles are starting to emerge as the market reaches its bubble-popping point, usually we start to see the ‘first-home-buyer’ headlines and ‘investor’ headlines emerging and this time it is no different. However, typically we see FHB and Investors pitted against each other in the headlines, this time it seems to be a bit different – with a twist even.
Evidence shows that in the last month investors have increased in the market by about 13%, the highest since 2015 and, an 18 year high, but claiming there is less opportunity make real investor returns. Further, evidence suggests FHB are more often aided or assisted by parents and family and the FOMO (Fear of missing out) is kicking in hard at Auctions with young people paying well over guide, reserve and budget just to secure a property in fear of where we could be in 6 or 12 months.
Local market: Auctions during lockdown went ahead in a limited amount of businesses and areas. Luckily we have a massive team and good access to emerging technology so we were able to conduct ONLINE Auctions during this
current restriction phase:
10 Victoria Avenue, West Pymble
For the last week of the campaign was open to buyers by appointment only, we would advertise a time that we were opening the property but buyers would need to book if they wished to attend.
On the Thursday before the Auction we sent out pre-registration forms to all our Contract holders, which resulted in 13 registrations. Further, we then issues all buyers with ‘Authority to bid’ forms which enabled each buyer to have an Agent physically present at the Auction which was held in our Turramurra Auditorium. Following me?
The buyer was then able to watch the Auction on Google hangout (i.e zoom, video link etc) and be on the phone to an agent who was actually placing bids for them.
We chose this process to ensure each buyer was fairly represented and had access to me (on the agent representatives phone) if needed during the Auction while still being able to watch the Auction.
We had very positive feedback from this process from both buyers and sellers.
This particular property sold $350,000 above reserve.
Wider market: The intergenerational report claims we have been through a 25 year property boom, one that has been fueled by low interest rates and low stock levels I don’t tend to disagree with this. The same report also claims an end is coming, mainly due to inevitable interest rate increases over the next few years.
Further, the report claims that current construction figures see an oversupply of new stock in the next 2/3 years.
We are still hearing feedback that the Sydney market on a whole is performing well, high tides raise all boats. However, there are signs that the tide is certainly retreating as Auction clearance rates dipped below 80% again, a couple of weeks in a row now.
We are seeing more post-Auction stock sitting on the market too. Sure, some of this could be vendor expectations out of line with market feedback, but vendors were getting their expectations from the rising market, which doesn’t seem to be rising anymore.
We actually need a moment of stagnation in this market, where prices hold for a while, we are currently sitting at record highs and are geared hard toward any information that suggests a move in either direction; up or down.
Banks: The big four banks are already factoring in a rate rise in the next year in spite of the Reserve bank claiming rates will remain the same until whenever. The intergenerational report predicts 7% interest rates in less than 4 years which will increase a $1,000,000 mortgage by about $2,000 / month.
The same report claims wages will increase for the same reasons, however I doubt they will increase $24,000 / year for each $1M of property one owns.
Thomas Merriman
Thomas Merriman 