New South Wales
After three years of what can only be described as the manic rise of Sydney property prices, the real estate market has finally cooled, and things are back to how they should be, writes Henny Stier, Buyers’ Agent at OH Property Group.
Until April-May 2017, the Sydney real estate market was experiencing a “feeding frenzy”. It was not uncommon to turn up to an open inspection to find a line of buyers at the front door. It felt like a stampede at some open inspections, with buyers racing to let the agents know of their interest. However, vendors and selling agents were gung-ho about rejecting early offers. Most were set on taking properties to auction, knowing that they were almost guaranteed multiple registered bidders and spirited bidding. With few exceptions, properties were selling for much higher than the price guides quoted. Buyers were gripped by a fear of missing out as prices kept rising. Many succumbed and bought C-grade properties at A-grade prices.
Since mid-2017, the property market has gradually but clearly altered direction.
By the last quarter of 2017, most of Sydney were seeing lower numbers at open inspections, longer days on market, and a lot of properties being passed in at auction or auctions withdrawn altogether. When a property did go to auction, there were few registered bidders and often only one active bidder – if any at all. Many vendors had to lower their reserve in order to meet the market if they wanted to sell under the hammer. Those who are not as motivated to sell will often pass the property in and let it sit until someone comes along willing to pay close to their asking; or it is put on the rental market. The outcome of this is softening prices as there are fewer committed buyers, and increasingly more desperate sellers – many of whom have already bought elsewhere and do not want to be stuck paying two mortgages for too long.
Even A+ grade properties which buyers would have fought over at auction nine months ago are taking several months to sell, and often at a much-reduced price from initial expectations. Many selling agents are scratching their heads and scrambling to find buyers due to poor turnout at opens. We are receiving daily emails and SMS from selling agents with headlines such as “motivated sellers”, “owners have bought”, “price adjustment”, and “open to offers”.
A few key factors account for the dramatic swing in momentum.
Some selling agents are optimistic and think the market will bounce back in 2018. This is not likely. Instead:
If you bought a property around the peak of the market, don’t panic. Despite the nominal reversal in growth rates since August 2017, Sydney dwelling values remain 70.8% higher than their cyclical low point in February 2012. There is still a lot of buyers wanting to get into the housing market – so a total collapse is extremely unlikely in the established areas of Sydney such as the North Shore. What is conceivable though is a further softening of prices which will reverse some of the gain made over the past three years. But if you have a long-term horizon, then this shouldn’t worry you too much. However, it may be challenging if you are trying to sell a property after having just bought very recently at a premium.
In a normal market, the best properties typically sell for the highest prices. This wasn’t always the case for the past three years but is likely to be the case now. Problematic properties are likely to linger and possibly not sell unless the price is heavily discounted.
Stay tuned for Henny’s next article, exclusive to North Shore Mums, which will discuss the Top Buying and Selling Tips for 2018.
*Source: CoreLogic December Hedonic Home Value Index results