May – A critical turning point for the market

May – A critical turning point for the market

  • May 31, 2022

It was an eventful month for the property market, and more importantly for Australia, as Anthony Albanese was appointed our new Prime Minister. The lead up to the election had the media in a typical frenzy, dissecting every bit of political minutiae, which on one hand distracted attention from the cooling housing market but on the other hand paralysed many potential buyers and sellers from making a decision until the results were in. With Labor taking the reins and putting forward no major policies that have a material impact on the property sector, we didn’t detect any noticeable adjustment in buyer behaviour and it would appear that most people have resumed business as usual.

We’re glad to put the election behind us as the property market was already transitioning and more distraction in an already confused market created another layer of uncertainty for buyers and sellers. Now we can focus on our more traditional property barometers such as interest rates, the auction clearance rate, general economic conditions and market sentiment. Throughout May the auction clearance rate across Sydney hovered between 41-43%, according to SQM Research which remains the foremost bastion of auction accuracy. We did have a kick with the cash rate as well and with further increases expected, this narrative from the RBA is weighing heavily on buyers as they ponder decisions. Last year we had the buyer frenzy and the fear of missing out (FOMO), while this year we now have the fear of overpaying.

New property listings tightened significantly throughout May as the cooling market coupled with the election saw many potential sellers hit the pause button. As a result our enquiry levels eased but didn’t fall off a cliff. One thing that remained evident during May was that quality properties are still in hot demand and are attracting 10 times the enquiry of our more typical homes. The prestige end of the market is also holding firm although we are seeing fewer marquee properties becoming available, which is a typical response when the market is trending downward. In our view, property prices are down 5-10% from the peak of August last year. With further rate increases inevitable, we may experience further declines which could erase up to half of last year’s gains.

It’s possible we’re about to witness one of the sharpest property price increases ever recorded followed by one of the fastest declines ever seen. Such an outcome would be consistent with the wild volatility of life and the economy over the past three years but it’s not a forgone conclusion. After working in the area for almost three decades, we’re used to seeing consumer behaviour flip in rapid time and typically over-amplify the situation at hand. Propelled by an insatiable media that loves an alarmist headline, consumers can never settle for the market simply plodding along – it either needs to be red hot or in freefall. Our advice to anyone looking to transact their property now is to block out the noise, make a move for the right reasons, have a long-term plan and do what makes sense for you and your family.

We operate in prestige markets throughout Sydney that are recognised as some of the finest places to live in the world. Our market does go up and down but over the long-term there is consistent growth. Bear in mind that in 2010 the median house price for our local market was $900,000 and today it’s $2.3m. Buying in a cooler market is without doubt the smart play but it requires breaking from the herd.

Matthew Hayson

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