November Overview – Sellers adjust course as Sydney prices fall for first time in 21 months

As we look to close the curtain on 2024, the higher interest rate environment is playing a pivotal role in the performance of the Sydney property market. The final auction clearance rate across the emerald city is parked close to 40%, according to SQM Research, listings are 12.9% higher than the typical Spring market, according to CoreLogic data, and overall housing affordability is seriously being tested. As a result, Sydney property prices are on shaky ground, with marginal price declines unfolding, which is the first tip into the red for 21 months. However, as with any price declines being notched up on data metrics, it’s the general trend line, buyer behaviour and real time activity across the market that we’re watching very closely.

We’ve reported on numerous occasions that we always see an element of buyer fatigue come into the market each year, but more recently that fatigue has been arriving earlier. One of our agents commented that they felt the mood of buyers drop away once the Melbourne Cup was run and won, and they may very well be right. Once again, all the forecasts about what will happen with rates in 2024 have been well wide of the mark. We commenced the year with initial hope that there would be up to three rate cuts this year, with the nation’s largest lender, CBA, still holding out hope for a December cut up until just one month ago. While rate relief in 2024 was dashed, there was quick reassurance that February would see the start of the rate-cutting cycle. However, this has also been put on the backburner, with forecasts now suggesting May through to July before we see a cut to rates.

The more recent narrative from the RBA has been concerning, with Governor Michele Bullock continuing to leave the door open for another rate increase. This rhetoric has sucked the energy out of buyers, applying more pressure on homeowners and increasing urgency for many sellers to lay their cards on the table with a price that suggests ‘get me out of here’. The softening of prices is evident across all the capital cities now and there is increasing potential that this may accelerate into next year as cash flows are drying up for many homeowners. In our assessment, values are softening but there is a wide variance of decline, from barely noticeable change to possibly north of 5% for other properties. There are also the outlier properties that are seeing accelerating prices; however, this now seems to be very much resigned to the best of the best properties in any given market.

This is all just part of a market cycle and given the 30-40% growth that was experienced between 2020 and the start of 2022, a modest price adjustment is not an unreasonable expectation. The major issue is that no-one wants to hear that their asset is not appreciating, particularly in an environment where there are pressures coming from all angles, given that inflation has pumped up just about everything we purchase daily. We’re going to have to work through this period, however like any market that is experiencing some challenges, there is always opportunity, with value emerging across all the markets we service. There are plenty of buyers jumping into these conditions. In fact, last week we sold 26 properties across 17 different suburbs, priced from $550,000 to $10m. As the great investor Warren Buffett would say, buy when others are fearful. While we’re not seeing a high level of fear, we’re confident that those who buy now will look back in time and be happy they purchased in this timeline of the market. So, pay attention – you have been put on notice.