Firstly,
Every time the market is performing well it is interesting to observe people’s response, buyers and sellers both act as if the market will never pull back and growth will continue forever. Buyer’s panic buy as they are concerned that they will be closed out of the market forever as prices rise and seller’s hold on to wait and sell at the absolute peak of the market (forgetting they need to buy back in).
The reality of the Real Estate market is, that if you are transacting at the same time, it does not have much bearing on whether the market is at its peak or trough as you will be impacted equally usually on both ends. The difference of course being, if you are upsizing, you will be paying less on the buy in a falling market; i.e 10% drop on $2,500,000 sell is less than the 10% drop on the $3,500,000 purchase.
The equivalent silver lining for downsizers is often a case of the seller having so much equity in the home that they are buffered against a 10% fall in the market. The downsizer is often buying into a market where their competition may be more heavily impacted by rate rises, as we are experiencing at present, and can bully their way in with a cash offer.
We have seen the Sydney market pull back a further 1% in the month of May solidifying a 1.5% drop for 2022 so far. However, the -0.5% was all in the first quarter and the
-1% was just in the month of May so it seems the decline may be snowballing. The highest monthly drop in prices ever recorded in the Sydney market was -1.8% in December 2018.
If prices continue to fall at this compounding rate, we could see a further 6% – 12% fall from the market this year.
The start of the last correction began in the middle of 2017 and from the beginning to end took 15 months before we started to see any positive growth return to the market.
My concern is that most of this data is pulled from settled sales, so May’s data is, in fact, February or March sales. Therefor the beginning of the declining figures we were reporting in Feb/March were November and December 2021 sales, showing that we may already be 6 or so months into this slope, which may also mean we are in for a longer fall than the last.
Local market:
I read an article on Domain highlighting Auctions where buyers’ were unwilling to bid unless they saw others bidding, this is called ‘social proof’ we are also noticing this in negotiations before and after Auction as well.
What we are seeing is, as the market turns, buyers are hoping that other buyers see the flaws in the home that they see or hoping other buyers don’t see the hidden potential and for some reason the property may die on the vine.
However, once the other buyers are also compromising on those flaws or have uncovered the hidden potential themselves, both buyers are locked into a battle on price.
Whereas in 2021, buyers weren’t even waiting they were going in headfirst and buying anything they could get their hands on.
Further, properties with little to no compromise will see this competition magnified, buyers will still watch and wait, but the pressure to act still needs to come naturally from other buyers.
This has made strategy more important than ever, new agents flourish in good markets, but as the market turns, it is all about strategy and we notice that agents with no experience finding buyers, negotiating with buyers and ultimately, creating deals out of thin air disappear.
Ray White Upper North Shore:
Our business is still consistently listing approximately 50 properties to market each month across the Upper North Shore, however our days on market have pushed out to about 17 days which is seeing our average monthly sales drop slightly – the Sydney average days on market is up closer to 30 days.
Wider market:
Melbourne is experiencing much the same trend as Sydney however, Brisbane will likely chalk up growth for the month albeit at half the rate of the previous, signs that they are likely a few months behind us.
Banks:
Already loading on the interest rate rise, be aware and PLEASE speak to a broker!
Interest Rates (RBA): Up .35% and holding at .85%
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.
Thomas Merriman 