Firstly,
New listings are still at their lowest 5-year average coming into the middle of the second quarter of 2023 keeping stock levels low. However, with slower average days on market we are starting to see an increase of on-market stock or ‘older stock’.
We are now in a two-speed market with good properties selling well, and selling above guide, reserve and/or market value. However, buyers are still not willing to accept too many compromises in their search just yet. While we are seeing increasing Auction clearance rates, higher bidder numbers at Auctions and more activity around the marketplace, buyers are still not 100% convinced we are about to see the market take off.
Usually in a ‘sellers’ market’ we see buyers willing to compromise on a lot, however in a ‘buyers’ market’ we see buyer confidence and we are very much in the middle now, with no obvious signs we are entering a sellers’ market.
Buyers have been slowly piling into the market and stacking up as new stock remains scarce; buyers battle it out for the limited amount of stock available. Further, buyers are feeling comfortable we are at the end of the interest rate increase cycle, save for the recent increase.
Despite the latest rise, we are now at the top of the predicted rate, a prediction made by the big 4 banks independent of each other earlier in the year – more on this further down.
Local market:
The theme of this, and other emails, will largely be based around supply and demand, not only is it the only obvious driver at present, but it is also the only explanation as to why prices are where they are. If supply remains low for a longer period, we may just ride this wave through until the market does truly start to go up again. However, the consensus seems to be that as soon as we see bulk stock start to hit the market, which it is due to do, we will see this supply and demand pressure start to shift, recognizing the full effect of higher interest rates.
For the first time since the end of 2021, we have seen local Auction clearance rates hovering around 80% and an average of 5 registered bidders for our local Auctions. We have seen Ray White Auction data that shows that buyers are paying 11.5% more than the highest offer pre-Auction and 3.5% higher than the reserve price on average, with some cases being greater than this.
Recently I sold a property in Normanhurst (bordering Wahroonga) with great success:
42 Hinemoa Avenue Normanhurst
Price guide $1,900,000 – $2,100,000
Reserve price $2,200,000
Sale price $2,300,000
Total buyer inspection 202
Total contract requests 55
Total bidders 13
No offers prior
We worked very closely with our sellers and buyers to achieve a successful strategy that the ultimate buyer, and our grateful sellers, were very happy with. However, this is a formula that we have had success with across all suburbs and price ranges where we analyse a lot of listing data, information from social media, buyer feedback and other Ray White sourced data to guide our campaign.
In some cases, this year we have re-Auctioned properties where we had no registered bidders at our initial Auction:
12 Yarrara Road Pymble
First Auction: No registered bidders
Second Auction (4 weeks later) 3 registered bidders
Price guide $3,000,000 – $3,300,000
Reserve price $3,200,000
Sale price $3,392,000
With low stock levels and higher buyer numbers the Auction process gives us a good chance to assess the market and provide measured feedback and, although we are selling about half our stock prior to Auction, the Auction process gave us the justification to do so.
Wider market:
We don’t usually measure much activity in January in the property market, so the most active quarter of the first 6 months is usually FEB – MARCH – APRIL and during this period we saw a 17% decrease in prices across Australia. However, we did see prices increase by about 1.4%, according to Core Logic RPData, in Sydney in April alone. Interestingly, both March and April saw price increases across Sydney, however we are still running at a loss for the year dragged down by a slow start.
As mentioned on numerous occasions this is likely attributed to low listing numbers.
Feb down 25%
March down 18%
April down 26%
Most commentary and media sites are remarking that seller hesitancy is the key driver for low listings, however, the dam must break at some point and the tighter the balloon, the louder the pop.
Interest Rates (RBA):
The RBA has lifted rates again [2/5/2023] after a slight pause as they had to gather their thoughts in April. This latest increase could signal the end of the cycle with earlier predictions from the big 4 saying 3.85% would be the top:
CBA: 3.85%
WESTPAC: 3.85%
NAB: 3.85%
ANZ: 3.85%
These figures represent the area where the banks have forecasted their fixed interest rates.
The statement from the RBA today celebrates wage growth and low unemployment but still signals inflation as the key driver to increase rates. However, oddly adds at the end that:
‘A significant source of uncertainty continues to be the outlook for household consumption. The combination of higher interest rates, cost-of-living pressures and the earlier decline in housing prices is leading to a substantial slowing in household spending.’
An odd consolation to frustrated stakeholders in the property market and also an obvious contributor to consumer confidence, or lack there of.
Thomas Merriman 