Sydney clearance rates / prices trending down

Picture says a thousand words.

While some might argue about exact final rates (Eg SMH reported that the final true rate is generally 7-8% below those numbers, therefore Sydney clearance rates haven't been above 60% since October...

Trend is rather telling for what most agree is THE most important leading indicator for prices (6-9 months ahead of prices)



Rush of Sydney spring listings widens the gap between inner and outer suburbs

 

Haha at least this one is factual!

Yes definitely true, auctions are far quieter. Auction results represent a far more neutral/balanced market in Sydney (65-70%).

Not sure about listing numbers, but on the surface it looks like a lot of sellers are coming out, bringing a lot more supply to the market.

 

Clearance rates leading prices relationship has been clearly established...

Less sure about listings volume . . . . .listings have been up anywhere from 20-40% YoY in the last 6 months (while clearances / prices declining)...Not sure of implications though.. anyone know?

 

Agree its a great lead indicator.

I think the figure is quite important here, not just the trend. A 60-70% clearance rate isn't particularly 'prices are falling'. It typically indicates a balanced/moderating market.

Sustained <60% readings, which may follow, typically correspond with actual price falls.

Some decent commentary here: Sydney auction clearance rates are signalling a cooling market

 

Just watching the news and again there is more news about falls in parts of the Sydney market...the SW was said to have had the biggest falls.

I also talked to my agent in the Ryde area...it looks like my unit has hit the price ceiling of 650k...he indicated it is likley to sell for 590-625k.

Ryde area and surrounds are in for larger than normal correction. I see areas like North Ryde, Epping, and Eastwood being hit harder than other areas.

 

Any view on listings volume rising?

 

This is all as expected...5-10% off peak prices of B grade and C grade stock as fewer investors can speculate and first home buyers and owner occupiers no longer have a fear of missing out to investors. A class stock is still getting strong outcomes though... investors with cash will still compete for that, so FHB's and O/Occ buyers wont be getting any free rides or quick reductions on the better renovated/quality stock.

It's a long way from being a market wide correction that sees everyone losing money - either on paper or crystalised . Last gasp ( late 2016-mid 2017) speculators will be cursing a little, but anyone who bought in 13,14 or 15 is still miiiiiiiiiiiiiiles ahead , and anyone who bought for the long term (PPOR buyers for example) dont care about any of this either... They'll only care if the RBA cash rate heads north in 2018 and beyond and there's flat wage growth as that happens ... but thats looking less and less likely as the regulations do the RBA's job for them .

Now, OTP apartment buyers may well be feeling a little nervous as we enter 2018... thats going to be an interesting 12 months as a lot of pipeline stock starts to reach practical completion and settlements start being called...

 

Why specifically these areas??

 

I own there...for example the price of Epping/Eastwood went from 700k mediam 10 years to almost $2m

The Chinese money has pulled out.

Also lots of unit developments there also.

 

Very True but that is the story across Sydney. All inner suburbs have been affected due to the Chinese money being pulled out. We have clearance rates at 30% however this is not being correctly reported.

 

Check out Chatswood prices.

 

They are crazy..I live near there..a couple of $5m sales....

 

I owned one in Eastwood and one in Marsfield.
The support in these areas are always there, haven't seen them going down. Generally houses perform much better in the area though.
Although in Epping, there are definitely lots of units being developed.

 

The market is starting to diverge a fair bit..

Properties over $2mn still strong

Properties under $2mn very weak..

 

Meanwhile APRA keeps Squeezing banks.

APRA urges further caution in mortgage lending practices

 

Yep... as I keep saying to those in denial about the regulators commitment to see this I/O to P&I migration through to its end, debt reduction will be king.

The APRA chairman has used what is fairly unambiguous language around living expense assessments still not being satisfactory, so expect further attention to be focused there. And remember that HEM's impact all borrowers- not just I/O borrowers. Westpac have turned up the heat on HEM's this week already...wont be long before others follow.

Loan to Income Ratio's also got plenty of mention.....

Seems fairly clear to me that any suggestion that APRA ( or ASIC) are going to ease, relax, reverse, lay off or in any way soften their action on these things is premature.

Dont confuse the fact that banks are making I/O rates a little sharper, with an easing of things. That would be a mistake.

 

another verbal attack on IO lending by APRA.

The researchers say APRA could step up its crackdown on interest-only lending, after limiting the amount banks can have on their balance sheets earlier this year.

These mortgage holders are heading for trouble, analysts say

 

I think you are spot on with your recommended strategy euro. Cashflow will be king... particularly with the big apra squeeze

 

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