Sydney house prices recovering

Forget the negativity media is spreading and focus on data/on the ground information.

1) No doubt Sydney apartments are going into a free fall from last quarter. Inner west and greater west are under pressure and things will get worse not better for apartments as more supply hits the market.

2) Houses hit the bottom in March/April and since then median prices are recovering. In some high demand suburbs, median prices have now surpassed 2017 peak after a quick recovery. Most suburbs have found a floor or have already recovered.

Given that CoreLogic figures have a lag of 3-4 months or more, I wouldn’t be surprised if Sydney median house prices end up being reported as bit higher than 2017 peak by the end of the year. Yes, it’s taking a bit longer to sell houses but sellers aren’t in any real pressure to sell (just artificially capped demand) and buyers are finding ways to go around borrowing limits. I know a family where mum just went back to work so they could satisfy the bank for loan they want for a nice house in a decent suburb.

My experience with talking to agents in few suburbs (lower north shore, Hornsby, hills) supports the same conclusion that sellers are holding firm and buyer are finding ways to meet the expectations.

 

This is wishful thinking. The trend is not even close to bottoming in Sydney for houses. If fact the older well priced well located units are the ones holding up.

But post the 60 minut3s story this could have all changed.

 

Let’s take Concord for example - full of older well priced well located units with very little new development in last 20 years. See graph below. 20% decline since the peak.

Unfortunately media conditions the brains of even the very experienced investors in such a way that we interchange reality with wishful thinking and the vice versa.

Sydney owner occupier housing stock has not only recovered, its going past 2017 prices in some suburbs.

 

Have you considered the drop due to a large supply of new units?

 

So a real estate agent told you market is recovering. Take it to the bank.

 

Here's some data:

• NSW for sale listings up 14% on a year ago
• NSW for rent listings up 26% on a year ago

These numbers were virtually zero at the start of the year, and the rate of increase is only picking up. Hold on tight over the next month as spring listings add to that..

Also not sure how corelogic would say prices bottomed out in April when their own daily index for Sydney says prices are at their lowest all year (down 3.8%) and still falling.

 

Very general statement but my clients who are purchasing in Sydney (which are a mix of FHB, upgraders, downgrades and investors) fall into 2 categories, those are have the servicing and funds ready to purchase but are too scared to pull the trigger until things settle or are low balling the hell out of properties and hoping something sticks.

I really can't see things changing unless the whole market changes which can only occur with massive wage increases (which I don't see happening), mass immigration (don't have enough info to comment either way) and ease of lending (which I don't see happening). The latter is a big one that most people understand and see the correlation with the market.

 

RP Data isn't a real estate agent. Ofcourse someone is funding the increased prices. Just because banks aren't lending as much as to investors much reliant on rental incomes doesn't mean nobody else is buying.

You are surely reading lump sump freely available public data which includes units, townhouses, new estates etc. etc..

I will go back to my first post:
1) Units are starting to face a blood bath all over Sydney, no matter old or new. They held well until first quarter primarily aided by first home buyer incentives but now fallen off the cliff.

2) Owner occupier houses across Sydney (minus new estates) hit the lowest point in April and most have now recovered well past 2017 peak.

I have seen data (not at the liberty to post it) where it is filtered for houses bought as PPOR in Sydney and it corroborates with above point 2.

You can also search for data on average PPOR loan size in Sydney and it is sharply growing. (I think its publicly available, try propertyupdate or Pete Wargent blog).

 

You literally wrote. “My experience taking to agents”

 

I know a few people who are doing this and I have done this. I think lowballing time was March/April and now we are past that. Main thing is that sellers aren't desperate so they can wait. It could all change quickly if banks raised interest rates to an extent where sellers weren't able to hold properties without losing money.

The only reason prices went soft in Sydney is banks removing some buyers from the market by tighter lending and those buyers are finding their way slowly back into the market.

Read the whole line It supported the data from Corelogic.

 

True that a lot of sellers are holding if they can't sell however even with that clearance rates are low with a lot of sellers taking offers prior to auction as there simply isn't enough buyers in the market.

I can't comment on every single market in Sydney but most markets just simply don't have enough buyers. What I didn't include in the above is the pool of people that want to buy but can't due to servicing.

I don't think rates increasing is going to create a mass exodus as many people can fix their loans at relatively low rates.

That said I'm basing the above from my pool of clients which is say 20-30 actively buying in Sydney so its not by any means a comprehensive list and it certainly may not be a correct reflection of the overall market.

Note I'm not saying prices are falling or going to fall just talking about the general buyer psyche.

 

I agree with most of what you have said.

Most buyers (if not all) say all the rational things and seem to be very cautious yet end up making an emotional purchase in the end (specially owner occupiers).

I think only people missing in Sydney market right now are sub million dollar investors who can't borrow anymore and its affecting prices in areas/dwelling types that attracted those investors like older units, off the plan, newer estates, cheaper freestanding houses in out west/black town etc..

 

No body is talking about the impact of people not being able to service mortgaged in Sydney...wages are not growing....in some instances they are falling.

Second a lot of people qualified for loans when they should not have...there is alot of mortgage stress out there. The real truth will be revealed in 2019-2021. There will be forced sales ..with people also going over the I/O cliff they will only put things in reverse.

Things do not bode well for Sydney as the level of debt people have is ridiculous..I am talking personal as well as mortgage. Something has to give........

 

Cash flow is key to keeping properties in any environment.
Some investors need some basic financial education.
FOMO has play a part in the boom and bust, but it is mainly credit expansion left unchecked.

 

Just wanted to add that its doubtful that Median reflects true ground reality as i see a lot of auctions showing price withheld. Which in IMHO is because it is sold at the lower price. I visited couple of auctions in Parramatta
one 3 bedroom unit was sold for price lower than 2 bed unit sold 2 years back in same building
one 460 m2 4 bedder house ( well maintained and conveniently located) got highest bid of 865k where vendor thought that 900k would be easy.
based on my limited experience i don't see west recovering be it house or unit.

 

Cash flow was always king.

Every one at some point even if banks say yes will run out of capacity to service.

The rest is risky games.

 

Uh... no, houses did not hit the bottom in March/April? Also, no, those figures are reported daily and absolutely do not have a lag. You can check them every day here: CoreLogic Home Value Index - Daily Indices | CoreLogic and view the back series of where Sydney was 12 months ago. CoreLogic Home Value Index - Back Series | CoreLogic

Sydney is absolutely not going to end the year above its 2017 peak. Sydney would have to not only stop falling, but grow about 7% in 3 months (which would be nearly double the rate of Sydney's fastest ever growth) to even return to its 2017 level. If you think that's going to happen, in this lending environment, I've got a bridge to sell you.

 

PPOR loan size is not the same thing as house price growth? Have you considered that with sharply tightened lending criteria, only well-off people can get banks to lend to them, meaning the average loan size may now be higher? That doesn't mean median prices are going to go up, they are completely different things.

 

You are looking at all dwellings. House only decline has stopped even in unfiltered all houses monthly data. When you remove investor purchases, owner occupier house purchases have had the median going up since April. I have explained this now 3 times in this thread.

 

No investors to drive house prices up anymore.excluding units, detached home prices are still falling in Sydney according to corelogic monthly stats.

Sydney houses month end value for august. 170.63 (-7.13%YoY -0.22%MoM)

Australian house values have fallen $36 billion so far this year