As I have been saying for the last couple of months, we have certainly seen the heat slowly coming out of the market which may be a result of a couple of things, largely, the end of the year and buyer exhaustion.
Mortgage brokers claim an almost 60% increase in borrowers waiting for approvals, so it can’t be all too bad. However, these may be new buyers looking to capitalize on the cooling growth. So far this year investor loans have jumped from $5.1B to $9.6B up 87.5% so a lot of this can be attributed to the investor market.
With rental values climbing dramatically, low interest rates and housing affordability becoming an issue, it’s not a bad time for vacancy rates and days on market dropping in the rental market.
Property Investment Professionals of Australia (PIPA) has remarked that downturns occur from a combination of reduced access to credit, falling affordability, worsening local economic conditions and declining consumer sentiment.
We have certainly seen signs of this with 15-30% growth in most of our Upper North Shore Suburbs.
Local market:
We have not yet seen prices decline locally, we have however seen less buyers at open homes.
As news of the decline in growth spreads, we are starting to meet new buyers in the market while only the battle-hardened buyers are paying the crazy prices of the ‘peak market’, the new buyers are more nervous and savvy.
The growth we have had is, in most people’s eyes, unsustainable so it is no surprise when we start to see the subtle changes in the market. However, the growth that most of us have made in our property is largely still there, the issue will be if we assume that this growth will continue forever.
A lot of buyers have started to tell us they are exhausted and they’re waiting for the 2022 market to recommit to purchasing with fresh eyes (and hearts) as new stock comes to the market.
Based on the amount of buyers we are aware of, whether in the market or on the sidelines, I am confident that Q1 2022 will still see good selling conditions, as a lot of these people won’t buy between now and January mainly due to [real estate] business closures, holidays and other impacts on the market.
Wider market:
It is no secret that regional Australia has almost been outperforming urban growth across Australia – namely regions within 2 hours of a CBD or metro hub.
As Sydney residents are continuing to work in a hybrid setting with home being a major base, we are seeing areas like Southern Highlands and Shoalhaven see the largest increases; almost 36%. However, anecdotally a lot of our sellers who are retiring earlier based on capital home growth or forced retirement are flooding to these areas within 2 hours of Sydney.
Australian housing prices lifted 1.3% in November, the 14th consecutive national increase in a row. However, in Sydney growth was a slight 0.9% compared the peak of the market in March where it was 2.8%.
We have seen almost every input that has been attributed to price increase start to lose steam over the last 4-6 weeks;
Fixed mortgage rates are rising with the big four banks all increasing their fixed rates
More stock coming to market encouraging buyers to wait
Pressure of rising prices pushing buyers further out as they move up the train line
This is not bad news, it is expected, it’s just the signs of a correcting market.
Adelaide stock is sitting -32% lower than a 5 year average and Brisbane -33.9% whereas Sydney only -2.6% so it is no surprise that with increased stock growth slows I must add that Adelaide and Brisbane are the two areas yet to show any signs of slowing down, and may still in fact see solid growth.
Banks:
Most banks are continuing to fortify for the impending rates increase which is for the most part guaranteed for 2023 and speculation is mounting for a 2022 increase.
However, a rate increase will not be the single thing that breaks this buoyant market it will be a contributing factor that may add to a decline in sentiment from buyers.
(Remember, we are all buyers)
If stock levels continue to increase, providing we don’t see negative growth, positive market sentiment may give us a stable 3-5% growth sustained over 2022. Not a dramatic increase but possibly not a loss either.
Interest Rates (RBA):
Still the same watch this space until later next year or 2023
IF you would like a report on your suburb, please reply and I will send a copy straight over.
If you have any questions or would like a report on another area, please let me know. Look after yourself and the people around you.
Thank you.
Thomas Merriman 