The real estate market has changed dramatically over the last year, and is changing still! So if you’re looking at buying or selling in 2019, Henny Stier, Buyers’ Agent at OH Property Group, is here to give NSMs the rundown on everything you need to know about real estate in 2019.
What lies ahead for property in 2019:
The start of school marks the beginning of the year for Sydney real estate. After the usual Christmas hiatus, fresh property listings have gone live on the Internet and Open Inspections are back in full swing. It is therefore timely to quickly recap the year that was 2018 and look at what is in store for this year. Is the property market on a nosedive? Is a crash imminent? Is it risky to buy before selling? How much of a discount is there to be had when buying?
2018 put buyers back in the driver’s seat
The past year in North Shore real estate was characterised by low turn-out at open inspections, protracted days-on-market for those selling, persistently dismal Auction clearance rate, unrealistic vendors unable to accept the new market realities, and eventual heavy discounting to get a sale done – sometimes involving the change of agents.
Sydney dwelling prices have now fallen approximately 13% from their July 2017 peak, which is the worst fall since the early 1980’s recession (CoreLogic). It is important to note that this is a Sydney-wide statistic. The reality is we have seen as much as 20% drop for some properties which have numerous inherent flaws.
Where have all the buyers gone?
At the peak of the market, it was not uncommon to be faced with long lines just to get into an open inspection. Getting forty to fifty groups through first open inspection was not uncommon. However, towards the last quarter of 2018, many sales agents lamented that they can barely get five groups through on Saturday inspections. Double digit inspection figures would have been brag-worthy! So where did all the buyers go?
It has been well covered that the banks have really tightened up on their lending; reducing the buying capacity of so many people. No one has been immune to this.
In addition to reduced foreign demand, many buyers are also jittery, worried that the market is only at the beginning of a major downturn. Those who are upgrading can no longer afford to rush into buying and therefore are holding back until they can sell their home.
A tentative start to 2019
At the beginning of the year, there is always some seasonal optimism amongst vendors and buyers equally. There is usually a pent-up demand over the Christmas holiday when the market is pretty much shut and there were hardly any new listings between end of November and end of January. We have been out pounding the pavement the last few weeks and observed the following:
- Pricing is all over the place. Some selling agents are scared to quote a price guide for fear of getting it wrong. Many are now refusing to give price guides altogether. Then there are those agents who have resorted to underquoting to bait buyers – hoping that a large turnout will result in competition to drive prices up. This method is risky and does not always work. Each week we are getting price adjustment emails as Vendors and agents try to work out where the tipping point is. As a reflection of this market uncertainty, more than ever, selling agents are turning to us to get our feedback on price because they know we inspect so many more properties than they do.
- Numbers at open inspections are up. Whereas there were less than a handful of people at open inspections towards the end of 2018, this year many open inspections have had 15+ groups through. A couple of weeks ago, several properties on the North Shore were attracting as many as 50 groups through at a first inspection.
- Interestingly, despite the significant increase in attendance at open inspections, agents are reporting that they still only have 1 or 2 genuine buyers per property.
- Selling agents are complaining that buyers are being extremely picky and need a lot more convincing and persuading. There just isn’t a sense of urgency for many buyers.
- There hasn’t been that many auctions yet this year. The ones we have attended have ranged from underwhelming to downright disastrous. Most have been passed in with either no bids or only a couple of low bids. Time will tell if this is just buyers being cagey at auctions or whether the properties eventually transact at a much lower price point relative to the agent’s selling estimate. Most selling agents are encouraging vendors to accept offers rather than chance it at auction.
2019 – a balancing market
We do predict a further gentle tapering in the Sydney market overall – we are not yet at the bottom of the cycle. However, we don’t expect a crash or anything dramatic like that. The North Shore real estate market has always been very stable because there is just so much demand for properties in this area.
The market may dip sharply if a flood of properties came on, but they won’t. What keeps prices somewhat stable on the North Shore is the inherent stubbornness that is built into the prices. The North Shore is quite an affluent area and many vendors simply won’t sell unless they get a price they are happy with. These are Vendors who would like to sell but do not need to sell. Of course the story is different for vendors who must sell due to their circumstances – they need to be willing to meet the market or risk paying the financial and emotional price of holding on. Not surprisingly, we can expect to see the biggest discounting where the vendors are most desperate to sell.
2019 will be a year where A-grade properties will continue to trade at a respectable price point; B-grade properties will need some discounting to motivate buyers to act; and C-grade properties or lower are likely to languish a long time on the market as buyers may not be interested even at a discounted level. This is not a bad thing and this is how it should be. At the peak of the market, many buyers were behaving irrationally and paying A grade prices for C-grade properties. During a rising market, such buying mistakes can be quickly absorbed by the pace of growth. But not anymore. Hence, it is important that buyers really understand what makes an A-grade property different from a B-grade property and how to factor in the difference in price accordingly.
Top 5 tips for anyone buying in the current market
- Get your finances in order. Selling agents don’t take you seriously if you don’t have a loan pre-approval and a deposit ready to go. Being able to buy unconditionally will put you in the best bargaining position.
- Pricing is extremely unreliable at the moment. You actually need to know what a property is worth; don’t just discount arbitrarily because you may either overpay or actually miss out on a good purchase.
- Focus on buying the best possible property, not chasing a bargain. The bargain could be a lemon you regret.
- Don’t play games and alienate selling agents. It can well backfire on you.
- Don’t think you know it all. A transitional market is not straightforward – you need to read and interpret signs well
Top 5 tips for anyone selling in the current market
- Do not buy until you have sold your property
- Do your homework and know what other properties you are competing against. This will help you to understand where buyers see value
- Buyers have plenty of options so you need to make sure your property is presented immaculately to stand out at the top of the pile. Now is not the time to skimp on thorough preparation for sale
- Don’t be persuaded to go down an Auction campaign just because the selling agent says so. Many agents will use the Auction deadline to put pressure on you to sell
- Do not be greedy. If you get a reasonable offer, don’t be quick to reject it because it may be the best offer you are going to get