NSW Sydney Market Slowly Deflating

I have been watching the Sydney market and it looks like it is now at the point where B ad C grade properties are pulling back.

See article below.

12ft |

The A grade stuff is still strong.

The attached article show a 3 brm unit in Military Dover Heights was bought for $950k....a couple of months ago it would have gone for $1.3m. Military Road is quite busy so even in the Eastern suburbs it is pulling back in b and C grade locations.

Though I have seen in Dee Why units under 1.3m are selling really well....even Manly is doing well for units. Houses are starting to lose steam in the Northern Beaches of Sydney.

Any other observations....

 

It's holiday season. October/November is traditionally best time to sell. January is the the worst.

 

Notice that in north rocks and Beecroft. Some properties with easement were sold $300k below the peak price and it took them long time to sell. Good properties were not making new records but still selling in price range.

WEST Pennant hills, too much stock made hugh pressure on auction clearance rate, most auction were cancelled in last 3-4 weeks, many properties are on market for 50+ days and buyers not buying them at high prices. Vendor will sale at 5-10% discount as more properties hit the market and their listing get older and traffic decreased.

 

We had one good December last year. A blip. An anomaly that is unlikely to be repeated for decades. Yet everyone thinks it’s the norm now. Christ.

 

Yep....lets see what happens to Sydney in new year..me thinks it won't be too good.

 

Yeah seeking the same.....the one I am watching with interest is the Hills...that went up soo much....what happens now?

For example...lots passing in Northern Beaches...now vendors have to negotiate. It went up the most in Sydney.

 

Most of the modeling shows house prices are driven primarily by interest rates.

When interest rates drop, affordability increases until asset price increases to the point that affordability reaches the previous level.

The last interest rate cut was 4th Nov 2020, so just over two years ago.

If you look back at 2018, prices started to fall. The last RBA cut was on the 3rd Aug 2016, prices started falling in 2018. The next RBA cut wasn't until 5th June 2019, some 3 years later.

We desperately need an interest rate cut to keep the market moving. Hopefully, the Omicron outbreak delivers that. We probably need the cash rate at -0.25 to -0.50% to start the next boom.

 

A cut? We're at 0.10% cash rate man! There's serious talk of rates going up. Negative rates are not going to happen bar COVID Mk II.

 

Good read

Is the end nigh for the 25-year bull market in property prices?

 

The article didn't attach the 3 bedroom in dover heights selling for 950k, it only stated it. I know the area well and I call BS on it.

I wanna see the specific listing.

 

Just reporting the facts. There is internal RBA modeling (released under FOI) that shows a 1% cut to interest rates equate to a 30% rise in property prices.

After COVID, we saw rate cuts:
4 Mar 2020 -0.25
20 Mar 2020 -0.25
4 Nov 2020 - 0.15

Which is 0.65%.

0.65 * 30% = 19.5% increase in house prices.

This is approximately what we have seen, so there should be no more house price growth. In fact, we are likely to see prices fall - like in 2018.

The RBA modeling also shows the reverse relationship. For every 1% increase in rates, we can expect a 30% fall in house prices. Simply, new entrants into the market are unable to borrow as much, and prices are set on the margins - i.e. by those buyers.

So to keep the market going we need more rate cuts.

 

Or we need them to print more money. Interest rates aren’t the only variable.

 

True, but it is harder to get the money to the first home buyer at the bottom rung. QE and bond buying has only dropped bond rates so much.

What the government would have to do is print and then gift each home buyer say $50k as a first home buyer grant. That will see home prices only rise $50k in the first year.

Then next year they have to increase that to $110k, so they can engineer another $60k increase.

But it really should be exponential increases to keep up with inflation.

The first home buyer and boost schemes worked fine during the GFC, but they would be insignificant and ineffective today.

 

I guess we will have a good picture of the situation with the various parts of Sydney and how the stock levels are tracking and selling times. I get the feeling that the start of November was the peak. One of the other factors is the ability to buy elsewhere and if people see there is lack of suitable stock say in the areas they want to buy then they may be more reluctant to go to market.

 

I think the increasing use of the Bank of Mum & Dad as the market rallied is a concern. It shows the broader market increasingly hitting affordability constraints, which at some stage will lead to buyer exhaustion.

 

CoreLogic Home Value Daily Index on 1 Dec 2021 214.04 & today 24 Dec 2021 214.30. Considering today is the last day of the year for the business. Growth (Sydney) was 0.12% slowest monthly growth in the last 12 months.

Weekly index is also falling from the last 8-9 weeks.

Some suburbs and some good property may do well next year. However, I don't see median house price to go high 5-10% as predicted by many bankers.

Property prices were going high because there was a shortage of stock. Most suburbs now got properties on market for 30-40+ days and new properties are coming.

I was talking to the Mcgrath Parramatta/Blacktown (principal). He said that 30 Jan 2021 they did 30 Auction in one day. 30 Jan 2022 they doing 60 Auctions in one day. Lots of these properties are not even listed yet.

Big supply is coming next year as the vendor wants to crystalise the unprecedented growth achieved in the last 12-14months.

I attended many auctions in Dec, many of them had no bid. Some of the Auctioneer set the bar so high that they wont take a offer below X amount and end up not receiving any bid.

Buyers are fed up with underquoting. One agent in Beecroft - price guide for auction is $ 2.6m, passed in at auction without any single bid, now advertised as private treaty offer over $ 3.2m.

Fix term loans increased almost 1% in the last 8-9weeks for most borrowers. Some borrowers borrowing capacity was reduced too. Too much supply in the market. APRA DTI requirement may come next year. Raising the interest rates is a real possibility. Immigration and international student are not coming as fast as predicted. Affordability is a real issue. I don't see any solid reason for the growth to continue any further.

 

Agree. I have a 2 bedder on Military Road. It's nothing special, but it's a $1.2m+ property in today's market. Add a few hundred thousand for a 3 bedder (Not that many 3 bedders in the area TBH).

Also the kid who's the source of the quote is the same guy who advertises on FB he's handled 'billions' in real estate transactions, even though he's only been a BA for less than a couple of years. Billions? Pleeeeeeaase!

So yeah, your BS radar is on point.

Edit: did some digging, looks like the property that sold is actually a fairly ordinary 2 bedder with no parking, balcony or laundry.

Market has definitely come off though. Time will tell if the show’s over or just taking a breather before going again next year.

 

You won't see negative rates.... it is headed the other way.

Unless the RBA wants to see the A$ tank... indications are inflation is building ...would be foolish to reduce rates again.

 

You see this every cycle...everybody seems to list at the same time...if the supply is substantial in Sydney...the prices achieved in Oct/Nov will not see daylight for many moons.....

 

Sometimes you overpay for the property and you lose years of capital gain.

Recently, I come across two properties

(1) Duplex site in Toongabbie - current owner paid $ 1,200,000 in 2015 and now want to sell at $1.25 - $ 1.3m and struggling
(2) Duplex site in Wentworthville - current owner paid $ 1,340,000 in 2017 and now want to sell at $ 1.4m and struggling

Even though we have a crazy boom but both vendors will not make any money on their purchases.

Hugh difference between Price and value.