The new year property market trend surfaces

There was no shortage of activity in the property sector during February. As auctions kicked off around the country the media was upbeat, with headlines such as ‘auctions set cracking pace’, or ‘auctions surge as rate cuts drive buyers’ running the public narrative. We initially experienced an early flurry of new listings, sitting 20% higher than the same period last year, but later in the month the market settled down a bit and we could see a clear trading pattern emerging.

While the media was bullish about the auction market, the headlines didn’t correlate to the performance of the entire market. While there were some robust sales occurring, most sellers were working their way through a cautious buyer pool to get their property sold. This more delicate market was supported by auction data from SQM Research, the foremost authority in reliable auction data, which had the Sydney clearance rate anchored below 60% for the month. Within the data it was evident that just 30% of listed auctions were in fact selling under the hammer, which is reflective of fewer active buyers per property.

Throughout the month we detected that buyers were showing a preference for renovated properties or those requiring less work. This is normal behaviour in a cautionary market, which is no doubt being driven by the higher interest rate environment. While there was some hope early in February that inflation was starting to get under control and rate cuts could be imminent, the RBA meeting minutes seemed to pour cold water on that sentiment and suggested that another rate increase cannot be ruled out. In our eyes, it’s reasonably evident that if we remain in an environment of higher costs for just about everything, then this will trigger even further sales. We’re still only about 70% of our way through the once-concerning ‘mortgage cliff’ that saw a huge wave of homeowners move from very cheap fixed rate loans to the now far more expensive variable rate. These events take time to move through the system as everyone can pull financial levers to delay the sale of their home or investment, however if this environment continues, something has to give.

An encouraging sign for the property sector is the huge levels of buyers attending our inspections and joining our database. Many may not be ready to immediately purchase but they are gearing up and at some point in 2024 they will purchase. The Sydney property market can never be underestimated and despite homes seemingly being unaffordable for so many Aussies, the dream of homeownership remains high on the agenda. Accordingly, we’re continuing to tick over a consistent stream of properties and for solid prices. The best of the best properties are setting new price benchmarks while our more typical properties are reflecting modest price gains from the peak results achieved in 2021.

While banks and financial commentators are largely still forecasting price gains of around 5% for Sydney this year, in our view there is just so much unfolding weekly that could swing the market in any direction. Our advice for any potential seller is to look at the real data when making a decision. Forget reading the tea leaves into what could happen in the future as that data has continually been proven inaccurate.