June closes with downward pressure on the market

In California they have a weather pattern known as June Gloom when the land temperature significantly heats up but the Pacific Ocean remains considerably cooler, which generates thick blankets of fog that descend across most of the city. This metaphor is appropriate for the Sydney property market for June as conditions certainly became gloomy following the whacking 50 basis point cash rate increase, falling auction clearance rate (sub 40%) and property values falling 1.5% for the month according to CoreLogic’s daily hedonic index. The media went into overdrive searching for any market commentator who was willing to share their most apocalyptic house price forecast, with declines anywhere between 15% and 30% reported. The cash rate is also expected to hit 2.6% by December representing a 26-fold increase this year alone that has left the RBA red faced following its very strong commentary only a matter of months ago advising Australians that the cash rate would not be increased until 2024.

While the media has a field day with dramatic headlines and so-called experts chiming in with their commentary, at ground level buyers, sellers and agents got on with business. The market fragmented during the month and certain pockets are experiencing obvious price declines of up to 10% in our assessment while others are continuing to show price growth. The sectors of the market that remain in high demand are family homes, prestige listings and quality renovations. On the flipside, given rising building costs and time delays to secure a builder and materials, we are seeing buyer caution for properties that require more extensive work. All in all though, buyers are understandably gravitating back to key streets, ideal aspects, great layouts and, of course, attractive price points to encourage engagement.

Through the course of the month, we continued to expand our market footprint with excellent sales in Lane Cove and Gladesville and a significant new suburb record in Petersham. We recorded plenty of buyer movement across varied areas as they sought bang for their buck through a transitionary market environment. In our experience buyers can often spook themselves from making a decision in such market conditions when the narrative is so negative but history suggests that a bear market is short lived. Most banks hold the view that the rapidly rising interest rate environment will end around mid-2023 with the cash rate being cut again later next year and through 2024. What happens between now and then is anyone’s guess and it already appears that various property types are experiencing different reactions from buyers.

Overall, we’ve seen pronounced changes compared to June last year with a decline of 39% in buyer foot traffic through our inspections, 27% less volume of property available and a 39% decline in the auction clearance rate. Buyer sentiment has also weakened but there has been a number of very encouraging sales for a select group of sellers that even the most bearish market observer has acknowledged did reflect price growth. With international travel back on the agenda coupled with a dynamic cash rate environment, we expect new listings will remain really tight through the winter months and this lower supply should minimise the severity of price declines. As always, we’re in the thick of it watching closely.