Firstly,
The most popular topic of conversation, both inside and outside of office, at present, is whether we have ‘peaked’ in the Sydney market and more importantly on the Upper North Shore.
In order to diagnose the end of a good market, we need to identify the peak, and all the data suggests that March of 2021 was the peak of growth in the Sydney market at 3.7% which dwindled to 0.3% by the end of the year. Now, we would need to register negative growth, and more importantly, subsequent negative growth in order to identify the other side of the tip of a peak growth indicator.
At this stage, we are yet to chalk up a decline in price growth across the Sydney market as a whole and especially no decline in the Upper North Shore.
As the Sydney property prices grew nearly $1,000 per day in 2021 overall growth was capped at around 33% and Australian property at around 22%, growth not seen since the 1980’s.
In order to really be able to predict an end to this peaking market, we would need to see at least three things impacted in unison, among others, being:
- Policy changes impacting interest rates, borrowing capacity (access to credit) etc.
- Market factors, relating largely to supply and demand
- Economic factors impacting wage growth, unemployment and inflation
Having a crystal ball would be the most accurate way of predicting anything in both the short and long-term in Real Estate. As we saw during the first lockdowns in Sydney growth was in steady incline and dropped off completely for a couple of months before recovering into the strongest market ever witnessed – which made no sense.
Of course, the RBA flagged no rate rises until at least 2023, however with incredibly strong economic growth figures at the end of December and inflation well beyond forecasts, the RBA may in a position to consider increasing rates out of step with predictions. Governor Lowe has stated that he would need consistent evidence before committing to any increase but most predictions are pointing to an end of 2022 rate rise of some description.
Historic data suggest there can be a lag of up to 12 months between an initial rate rise and a recognizable impact on property prices. …
Local market:
Buyers are back in force for 2022 with up to 60 groups through some of our open inspections and a proportionate number of registrations of buyers at our Auctions, up to 20 at one of our Auctions.
We are seeing that buyers who are hanging on from 2021 are certainly the most aggressive, placing offers early in the campaign to secure purchases before Auction. It may take a couple of weeks or months for the new buyers to cotton on to what is going on, but we are seeing the education is swift!
Ray White Upper North Shore has launched almost 80 properties so far in 2022 and at this stage we have varying levels of positive feedback with no real indication of any immediate decline. But, the increase in stock has thinned buyers from last years record numbers.
Wider market:
Borders open in 2 weeks!
Most markets are celebrating an increase around 30% based on the gross Sydney growth figures and this was largely out of step with predictions of what would have occurred in a pandemic market. However, a lot of the FOMO (fear of missing out) buying was supposed to be attributed to buyers buying property before the borders open unleashing and influx of cashed up foreigners and ex-pats … whether this proves to be true or not we are yet to see.
In November, another 96,346 properties were listed for sale, according to SQM Research. This was 2.3% higher than the month before and 20.4% higher than the year before.
In November, the amount of new listings added to realestate.com.au reached their “highest level in a decade” for capital cities and “highest level in five years” for regional locations.
Days on market increased by 14 days in November year on year.
Banks:
Australians committed to $31.4 billion of home loans in November, which was 6.3% higher than the previous month and 33.2% higher than the previous year.
Owner-occupier borrowing was up 7.6% on the month and 17.2% on the year, while investor borrowing was up 3.8% on the month and 86.9% on the year.
Almost 70% of these loans were written by brokers showing a large trend of buyers toward brokers, largely looking for cheaper interest rates of course.
Interest Rates (RBA):
As discussed, no change yet
Look after yourself and the people around you.
Thank you.
Thomas Merriman
Thomas Merriman 