22 November 2019
1300 794 893
Search
Search
Subscribe
Sydney is holding up very well as it makes the transition from boom growth to normal growth.

Spring property so far

John McGrath
10 October 2017

By John McGrath

The best way to gauge how a market is doing is by looking at auction clearance rates. They give us a real time perspective on how buyers are feeling and whether vendors are meeting the market and being realistic on price.  
 
Over the five Saturdays in September – the first month of Spring selling, we saw auction clearance rates in Sydney dip into the late 60% bracket and stay there. The lowest they got to was 66.5% over the long weekend, according to CoreLogic data.
 
So, what does this tell us?
 
First of all, clearance rates are falling but not rapidly. We’re down about 10% compared to six months ago and this is perfectly normal for a cooling market.
 
Secondly, a 60% clearance rate indicates normal market conditions and this doesn’t concern me, particularly with respect to Sydney.  We’ve had a very long sustained boom period and now we need the market to calm down and consolidate its price growth.
 
Auction clearance rates include properties sold prior to auction and we’re seeing this happen more often now due to softening buyer demand.
 
We expected cooler market conditions to be a catalyst for increased listings. Vendors are seeing that the market has peaked and now is the time to sell for maximum value. Plus, with more stock on the market, they’re no longer feeling the concern they had last year about their ability to buy back in. This appears to be happening with SQM Research reporting a 12.3% increase in listings for sale in Sydney this September compared to September 2016. This was the greatest increase in listings of any capital city.
 
In terms of price changes this Spring, we haven’t seen anything dramatic. Demand has waned a bit and buyers are certainly more selective – they have a bit more choice and don’t want to pay a premium in a slowing market. But so far, we’ve only seen an 0.3% decline in Sydney’s median house price in September and that’s nothing to be concerned about at all.
 
Let’s look at how the median house price has changed in 2017. CoreLogic reports Sydney’s median house price every month and as you can see below, it has jumped around a bit this year – gaining in some months, losing ground in other months. These fluctuations are typical at this point in the cycle.  
 
Monthly changes in Sydney’s median house price 2017
 
January + 0.5%
February +2.7%
March +1.6%
April +0.2%
May -1.0%
June + 1.8%
July +1.3%
August -0.1%
September -0.3%
 
All in all, Sydney is holding up very well as it makes the transition from boom growth to normal growth. There is still the possibility of a minor price correction, especially if interest rates escalate significantly but this is unlikely.
 
However, it is worth noting that the banks are continuing to raise mortgage rates independently of the RBA and this is prompting some investors to sell. However, I think most investors would be better off keeping their assets and fixing their loans instead if they’re concerned about rising costs.
 
Many fixed rates are cheaper than variable at the moment – we’re talking mid-4% for three years and early 5% for five years on interest only. However, always talk to a broker first before making this sort of change.

If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.

Let us know what you think
Get the latest financial, business, and political expert commentary delivered to your inbox.

When you sign up, we will never give away or sell or barter or trade your email address.

And you can unsubscribe at any time!
Subscribe
1300 794 893
© 2006-2019 Switzer. All Rights Reserved
homephoneenvelopedollargraduation-cap linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram