Welcome to the Treak Real Estate Property Update: our regular round-up of news from the Sydney and national property markets, as well as what’s happening right here at Treak!
Six months of growth in succession
After an at-times torrid 2022, Sydney house prices continue to bounce back. Prices are up 3.03% from their November 2022 low, up 2.94% since the beginning of this year (PropTrack), and there was an impressive 1.8% rise in values in May alone (CoreLogic).
Auction clearance rates held at 70% or more – an impressively high number – over the last three weeks, and private treaty sales are selling faster with less vendor discounting.
Many experts presumed that the Reserve Bank's decision to increase the cash rate in both May and June – pushing it to 4.1%, its highest mark in over a decade – would dull demand and halt the ongoing rebound in home prices. That hasn’t happened.
But while the current rise is far from a property ‘boom’, it does seem to indicate that we've passed the bottom of this cycle, and it's likely overall property values will be up around 7% or more this year.
Will more properties come onto the market?
Part of the reason for this rise in values is that housing demand is outstripping supply. There is limited ‘good’ housing stock on the market, leading buyers to get a feeling of FOMO (fear of missing out) – a sense that the next opportunity might be the last good opportunity for a while.
There has actually been a slight improvement in the availability of homes for sale in recent times – over the past three months Sydney housing stock levels have risen to their highest levels since the latter part of last year. But the bar set last year wasn’t particularly high, and the number of new listings entering the market remains low when compared to previous years.
Buyers hoping for a potential influx of supply this spring may be disappointed. The already high demand for homes will only increase later in the year, as buyers enter the market in the hope of securing a property before Christmas.
It will be interesting to see if more vendors take advantage of improving prices and market conditions this winter, and look to beat the spring rush when competition to sell could be more intense.
Another scenario that could lead to increased supply is that some vendors are forced into the involuntary sale of their homes, due to the impact of ever-increasing interest rates and the prospect of rising unemployment.
This situation should be placed in the ‘unlikely’ basket, given we haven’t yet seen an increase in the flow of housing supply despite 12 successive rate rises so far, along with the fact that mortgaged households have strong prepayment buffers, and that selling is the absolute last resort for mortgage holders – most will try everything, including working themselves to the bone, before being forced to sell their home.
But if home values continue to rise at the same pace observed through the last few months, capital growth could lead to higher vendor volumes in the second half of this year than last year.
Why are prices on the rise?
So what is pushing prices up again, despite rate rises and global economic instability? Here are the five major contributing factors.
Limited stock
As mentioned above, a low level of housing stock over the past 12 months is likely a result of prospective vendors being hesitant to sell amid lower home values. This hesitancy works in the vendor’s favour, however, as the low levels of housing stock leads to higher demand and prices, at which point more vendors are willing to sell.
Tax changes
The recent price rises in Sydney may have been influenced by the tax changes implemented by the former NSW Government, which granted most first home buyers the choice of paying an annual land tax rather than one-off stamp duty for properties under $1.5m. This boosted first home buyers purchasing power for properties under $1.5m and created somewhat of a ‘mini bubble’ for properties under $1.5m.
However on July 1st, The Minns government will abolish the first home buyer land tax choice and instead the threshold for stamp duty exemptions for first home buyers will be lifted from $650,000 to $800,000 and stamp duty concessions from $800,000 to $1 million under the First Home Buyers Assistance program.
High rents
Faced with rent rise upon rent rise over the last few years, many renters are desperately trying to become homeowners in order to pay off their own mortgage rather than someone else’s. Those high rental yields also form a compelling incentive for property investors to grow their portfolio.
Overseas migration
After COVID forced the Australian migration program to more or less halt for a couple of years, we’re currently playing catch-up in attracting migrants to our shores. From overseas students to skilled workers, the 400,000 people we are welcoming to our shores in 2023 will only increase housing demand.
Interest rates
It has come as a surprise to some economists that house prices have risen so steadily over the last six months, despite a dozen rate rises, equal to an extra $2000 or more being added to the monthly repayments of a $1 million mortgage. But for quite a while the sense has been that the cash rate is nearing its peak, which has given buyers confidence. That said, there’s a possibility that more increases are to come, which could impact home prices in the second half of the year.
The best time to buy, sell or rent
Between the robust nature of housing demand, the decidedly limited supply of stock, and the healthy level of savings many households enjoy, the recovery in housing prices is likely to continue for a while yet. And if interest rates level off, or even fall, the momentum may only increase.
But no matter what the state of the Sydney property market might be, the right time to buy, sell, lease or rent will always be a personal decision based on your personal situation.
At Treak we are here to help you navigate the market and sell or secure a property at the perfect time and the best possible price. As experienced agents, we can be the edge you need in an ever-competitive real estate market.
If you’re ready to live out your property dreams, get in touch today.
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