October – New listings remain tight and price declines start to ease

October was rather subdued for sales across Sydney, breaking from the norm for what is typically one of the busiest months of the year for property transactions. There is something very different in the air right now as the weight of 32-year high inflation and rapidly rising interest rates generates no shortage of doom and gloom articles that has every Australian watching their pennies. Buyers are feeling the shift in conditions with banks tightening credit and erasing at least 20% off what they would have lent the average borrower at the beginning of the year. While bank tightening is impacting some buyers, other more financially fortunate buyers are also feeling the impact from a seesawing share market, rising borrowing costs, rising living costs and a tight labour market. As we’ve been saying to so many sellers this month, we are working with people who genuinely want to purchase but behind their decision is a significant wall of worry that has many hesitant to move ahead with a transaction.

The auction clearance rate did lift a touch during October and stabilised around the 46% mark, according to SQM Research. This outcome still reflects downward pressure on property prices which is reinforced by CoreLogic data that has seen Sydney property values decline by 10.4% this year. However, the speed of monthly price declines has eased, which is the result of more sellers willing to negotiate and meet the market. As we’ve reported over recent months, at ground level we’re seeing price drawdowns anywhere between 5% and 20% depending on the quality of the asset. We’re firmly in a buyers’ market and transactions are occurring when they see value. If buyers do not see value, they are simply not engaging in any further conversation and are content to just wait and see what happens.

While this may all sound a bit bleak, we’re coming off the back of one of the strongest markets in Australia’s property history. It’s the speed of the change that has many people in a tailspin but once we work through a client’s individual circumstances, most recognise that they’re still making a healthy profit when they do sell. It’s understandable that people feel like they’re losing money as the glory market is now firmly in the rear vision mirror, however a level-headed approach is now required for anyone buying or selling. The current market dynamic looks set to be in play well into next year, so a wider acceptance of these conditions needs to be adopted. Importantly, even with softer selling conditions there are opportunities as value is surfacing and seasoned buyers are acutely aware that downturns in quality markets don’t last long and swooping in when others are fearful is a wise long-term play.