Hi again
Firstly,
Data has shown that from September 2020 to September 2021 the Sydney market received 30% growth in median sale price value, the most aggressive growth period in Australian property market history. Are we satisfied yet?
Economists from the big banks are synchronized in their annual growth figures for 2021, predicting to be sitting at around 27-28% when we are all said and done. However, early indications are suggesting 2022 growth will be throttled to a reasonable 5-6%, which is a bit more palatable than a decline, which alternative views are also suggesting.
Local market:
The Upper North Shore reported a quarterly increase (ending Sept) of 1.2% on median sales prices, which is a great average. However, we were enjoying in excess of 4% per month in the first 2 quarters of the year.
Reports from property listing and data sites are suggesting buyer exhaustion and affordability are largely to blame for the decrease in record-breaking growth figures. However, ‘new listings’ figures have increased dramatically as well giving buyers increased buying opportunity which may be contributing to this slow down.
Mid-September to mid-October saw a 28% increase in new listings on all platforms across the country as sellers prepared for post lockdown Auctions and the annual spring market boom.
Wider market:
Upper North Shore sellers do spend a lot of money buying back into local suburbs as upsizing and downsizing opportunities present themselves but a larger portion head East and North, with anecdotal evidence suggesting Eastern Suburbs (which dropped 2% last quarter), Lower North Shore and Northern Beaches see the largest portion of our sellers.
Data for 2021 shows that the Northern Beaches median sale prices have increased by $867,000 YoY as buyers from other areas are also fleeing North. Covid working conditions and the change in working habits are largely to blame for increased prices in the Northern Beaches. However, this has pushed the plans of some of our sellers back and put increased pressure on their expected sale price in return. As a side note, this is occurring on a smaller extend with sellers leaving for the Central Coast, which although more affordable, has increased dramatically as well, halting retirement plans.
High prices have been largely attributed to low stock levels, however data suggests weekly listing rates are up close to 40% and rising. While this figure scares people expecting, or enjoying growth, this figure is good as a lot of people were holding off selling waiting for something to buy, this will largely just increase transactions across the overall market.
Days on market have progressively decreased over the year averaging below 27 days. This is no surprise as our Ray White Upper North Shore days on market average is around 12 days. Buyers are possibly battle-hardened by the auction process, hitting agents harder and earlier with higher offers. This is also reflected in the higher number of off-market transactions, largely to buyers’ agents acting on behalf of buyers, usually paying above market for their clients to secure property early.
What does all this mean? Maybe nothing. However, it is certainly early signs of an exhausted market. Early 2019 was the first time we realized we were in a declining market as the buyers were sluggish to return after a patchy 2018 market. A post-mortem would have suggested that we were actually losing traction by quarter 3 of 2018. I’m not making any bold predictions, however these figures are all starting to give me PTSD.
I must say though, there are still so many reasons to suggest that 2022 won’t be a declining market, rather a relatively normal – slight growth at best – market, which would benefit all of us.
Banks:
Banks (and other lenders) have been regulated to take on a smaller portion of clients with loans where the Debt to Income ratio is 6 times annual income or more. Forcing borrowers’ capacity down.
Further, the borrowing floor rate has increased, from July 2019 figures where lenders were required to assess a borrower on their ability to actually repay 2.5% higher than the rate they were given. This figure has now jumped to 3% i.e if your rate is 2.09% the bank would now need to assess you on paying 5.09% in order to provide you the pre-approval sum. This will lead to a decrease of around 5% borrowing capacity according to APRA.
Interest Rates (RBA):
No doubt still on hold.
Thomas Merriman
Thomas Merriman 