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!
Spring sales season is here. But will interest rate increases slash prices?
At the risk of sounding like an average 90s comedian, what's the deal with property prices? As we venture into the spring sales season, let’s try to answer that question.
In Sydney, FOMO (fear of missing out) appears to have been replaced by FOOP (fear of overpaying) as buyers take caution in an uncertain housing market hit by inflation-driven cost of living pressures and a succession of interest rate rises.
At the start of September the cash rate sits at 1.85%. The RBA set to reconvene on 6 September, where it’s likely to increase the rate by another 50 basis points. The latest projections indicate that the cash rate will peak at around 4% sometime in 2023, having been at a record low level of 0.10% as recently as April this year.
When you do the maths, a total interest rate rise of 4% on a $500,000 loan equals an increase in mortgage repayments of over $1000 per month. It’s not surprising then that these rate hikes have had an immediate effect on buyer demand and spending power.
According to Dr Nicola Powell, Domain’s chief of research and economics, houses in Sydney’s inner west have already experienced significant price drops. Across the Marrickville, Sydenham and Petersham region homes sold at an average discount of 11.2%. Suburbs like Ashfield, Strathfield, Leichhardt and Balmain recorded drops of 8%.
Zooming out, Core Logic reported a 2.8% drop in Sydney overall over the last three months. Private treaty vendors were also shown to offer the deepest discounts in almost three years – an average of 6.7% off the original asking price.
Springing back into some stability
The Sydney property market is pretty resilient, so while inflation and interest rates have injected uncertainty, buyers are now adjusting to the downturn.
Spring has always been the selling season in Sydney, and the increase in listings over the last few weeks shows that 2022 probably won’t be any different. Auction clearance rates have improved for the fourth week in a row, with a most recent figure of 57% according to Domain. This is a big fall from 12 months ago, however, when the same figure sat at 82%, which means that buyer demand remains at below-average levels.
If we break this demand down further, we see that A-grade homes – those that are in a great location, are high quality and/or recently renovated – are as popular as ever. Demand for B-grade homes and fixer-upper C-grade homes, meanwhile, seems to be falling, as the increased scarcity and cost of construction materials makes them less viable.
Family-friendly apartments in medium and low-rise buildings within Sydney's inner and middle-ring continue to perform well as investments, as they meet an increasing demand from families who are unable or unwilling to buy property.
Our top tips for Sydney’s spring sales season
So how do you win in the Sydney property market this spring?
Sellers should look for an agent who offers accurate and honest pricing. If agents fail to price the property correctly, it may take longer to sell or could be passed in at auction. At Treak we’re noticing a trend of some agents failing to offer a price guide at all, which makes it impossible for home buyers to understand whether they can afford a property that is listed for sale.
While the property market might look rather grim when viewed through the prism of rising interest and inflation, cashed up buyers should see it as an opportunity. You can now purchase a home that may have previously been out of your budget, before the Sydney market picks up again when the interest and inflation dust settles.
But more than trying to time your next purchase based on where we are in the cycle, the more important question to ask yourself is whether you are financially ready to buy a property. If the figures say you are – you have a nice deposit, your income is secure, you’ve built in a buffer to cover potential rate rises – this might be the right time to buy in Sydney. You’ll be competing against fewer buyers, because most are sitting on the sidelines waiting for stability to return.
Helping you find your perfect Sydney property
Wondering if now is the right time to find your next home or an investment-grade property? Looking for help in this uncertain market?
At Treak we pride ourselves on having our finger on the pulse of the Sydney property market, and helping our clients to find the perfect property at the perfect time! From dream homes to the wisest of investments, we’re ready to help you secure exactly what you’re looking for.
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