After years of consistent price growth, we can safely say that Sydney has finally cooled to a more balanced market for buyers and sellers alike. Auction clearance rates which were recently topping the 80% mark are now consistently sitting around 70%. Last weekend saw Sydney hit a new low of 67%.
As it is generally harder to sell properties today, many would assume prices have fallen. However, with deeper analysis actual results are a mixed bag – record prices are still being paid for premium properties, while many sub-average properties are failing to sell at auction; some properties even being withdrawn from a sales campaign entirely.
The number of buyers actively competing has also dropped substantially. Many sales agents currently report that it feels like all the qualified buyers left in the market are pursuing the small pool of quality properties available. Experienced agents are now conditioning vendors of ‘problem’ stock (ie. On busy roads, poor floor plans, noisy, dark etc.) to lower their expectations. So, while it’s a great time to buy an average property, don’t necessarily expect to pick up something really special at a discount.
Buyers have recoiled for two main reasons. Firstly, APRA has further tightened lending policy making it much harder to borrow – particularly for investors. The new regulations have forced many buyers to revisit their pre-approval status, and in some cases, have had to lower their budgets. Secondly (and perhaps more importantly), the media has been consistently predicting a crash or price correction in the Sydney market. As auction clearance rates fell, many buyers were encouraged to sit back and wait for a bargain. We saw this trend happen the last time APRA substantially tightened the reins back in mid-2015. Borrowing became more complicated, but the fundamental cost of money and tax incentives related to buying property did not change. Once good levels of quality stock were presented in late-Spring and Summer, buyers returned to the market with renewed vigour and we saw median prices Sydney-wide rise again.
Our advice to home buyers and investors alike would be to get out into market now, and crucially, have your finances checked and make sure your loan pre-approval is still current. There should be a surge of quality listings in late Spring, and many of those vendors will be ‘well-conditioned’ to accept reasonable offers pre-market or prior to auction. Concurrently, we are seeing hints in the media of some relief for borrowers with ANZ, Bankwest and HSBC announcing better deals for particular applicants. If this trend continues, it is likely buyer competition (and eventually median prices) will again steadily rise.
We have never been more active in negotiating pre-market and off-market deals for our clients, as the number of opportunities available right now at multiple price-points is greater than we have seen in many years. For buyers to truly capitalise on these current market conditions they’ll need the ability to source quiet (off market) listings, and the skills to negotiate and secure properties below the asking price. This is where experienced and well-connected Buyer’s Agents such as Prosper Group are well placed to capitalise on what might prove to be a small but very fruitful window of opportunity.