Big prestige sales early in April before 20-year high inflation triggers a cash rate increase

They say a week’s a long time in sport and this adage can certainly be applied to the property market. The early stages of April were intensely busy as agents, sellers and buyers scrambled to do deals before the Easter and ANZAC Day holiday period while also aiming to avoid any sentiment impact that the Federal election may deliver. We managed a raft of this year’s strongest sales prior to Easter with 16 Llewellyn Street, Balmain fetching circa $6.5m, 116 Louisa Road, Birchgrove selling for well above $9m, 15 Wharf Road, Birchgrove reaching north of $8m and 11 Adolphus Street, Balmain fetching north of $7.5m. All experienced high levels of enquiry and bidding competition. On top of these prestige sales, our company continued to trade in more suburbs than ever before with solid results across the Inner West and Lower North Shore. While we could see evidence that the market was easing, there was enough buyer energy and confidence to ensure most sellers had the opportunity to consider offers and secure a sale.

As we moved through the holiday period there was a noticeable drop in new listings coming onto the market, which was expected. Additionally, the mood and sentiment became relaxed and reinforced the fact that people were desperate for a break and keen to get away. Perhaps a few days of sun were also in order after the horrific weather Sydney has been experiencing. As April progressed so did the election shenanigans, which was certainly distracting and impacted the number of properties coming online. Beyond the election the significant news headline was that inflation hit a 20-year high of 5.1%. Even the RBA’s strange metric of underlying inflation spiked at 3.7%, well above its own target range of 2-3%. This will have an immediate impact on the property market with a range of banks, economists and financial institutions suggesting the RBA needs to move swiftly and aggressively to raise the cash rate as soon as the May 3 board meeting. If the RBA does decide to lift rates in May, it will be the first time since 2007 that the RBA has lifted the cash rate during an election campaign. Only late last year the RBA’s position was that it would not look to lift rates until 2024, however its language has rapidly changed now and we’re looking at a potential cash rate sitting at 1% by the end of this year.

As April draws to a close, sellers are adjusting their price expectations. Perhaps a few anomalies for exceptional properties are still holding firm, if not continuing to over-perform, however the broader market is now experiencing a downward trend. According to CoreLogic’s data, Sydney property prices declined by 0.3% for the month and the auction clearance rate saw 10 consecutive weeks of declines, landing at 45% on April 23. Whenever we see the clearance rate around the 50% bracket, it reflects downward pressure on prices, but we’re seeing a very slow easing of conditions. Importantly, we’re coming off the back of the third highest price increases in Australia’s property history, so there is no need to hit the panic button at all. In fact, we’re enthused to see an orderly approach to the changing market conditions with buyers and sellers being quite sensible about how they approach the present market dynamics. That said, a week is a long time in property, and we’ll need to stay on our toes with May shaping up to be a defining month in politics and for the RBA’s credibility.