Last year's Sydney lock-down temporarily put the brakes on a large pool of buyers across Sydney, however this year it hasn't. August has seen a dramatic drop in stock levels as cashed up buyers have now absorbed most of the listings advertised. Unlike last year where most popular market commentary had owners going to market to avoid the predicted 20-40% correction which was forecast, this year there is not the same motivation and circumstances haven't been conductive in bringing needed supply.
In the month of July the number of homes coming to market across Sydney dropped 19.9% however in some suburbs facing stricter lockdowns real estate offices are reporting up to a 90% decline in new listings. Whilst calculated vendors are taking advantage of this, I have found that we are conducting far fewer market appraisals as many owners decide to wait till lock-down ends. Factors other than confidence are determining this;
1- Appraisal numbers are down. Vendors are not being progressed at same rate
2- Vendors who are looking to move interstate can no longer fly out to inspect
3- The surging house values has created an unaffordable gap for unit upgraders
4- House sellers have less available trade resources to prepare their homes.
August auction clearance rates in the Eastern Suburbs are on the rise as supply dwindles and buyers become more familiar with the the online auction process. The week ending 1st August saw a clearance of 65%, the 8th August 80.6%, 15th August 85.1% and this week it reached 89.5%.
Spring has historically been the most active season then it comes to activity. Listing and sale volumes in Sydney have risen by an average total of 35.5% during spring over the past decade pre-covid. This means more buyers, more vendors, and more turnover during spring. How will this play out this year? Will we see more turnover? Yes. Will we see an equal ratio of buyers and sellers hitting the market? No.
Preparing a home before going to market usually starts with an appraisal, and what often follows is a number of weeks making sure the home is presentable. With trades (eg painters and gardeners) subject to lock-down, during August less homes have been prepared for spring selling, and all construction near completion such as apartment blocks and duplexes have been forced to shut down. However buyers, on the other hand still have access to all required professionals such as brokers, accountants and solicitors. This has created the current micro-surge in prices.
Some sub-markets the supply verses demand factor has been ground-breaking. One stand-out example has been the Botany townhouse market, which often fills the gap between houses and apartments by providing an affordable option for small families upsizing. In the same two-month period last year the average sale price was $1,205,000, this year it's $1,562,000 a 30% plus jump. Apartment vendors across the South East have welcomed the lower stock levels, as the over-supply of apartments is finally absorbed in higher density sub-markets such as Maroubra Junction, Botany, Mascot, and Green Square. A notable change we haven't seen in five years since pre-royal commission.
My feeling is that we are in for an increase in prices between 2-5% across Sydney's East over spring as we see record breaking competition for new listings and lock-down limits supply. As the weather heats up and people get vaccinated, depending on when we are out of lock-down we may see a number of pent-up vendors going to market in November bringing one last wave of fresh supply pre-Christmas however this will be quickly absorbed. I don't see an easing of property values until at least April 2022, once the market has had time to balance itself. This was same the month in which prices began to ease in the last peak of 2017 preceding the two year market correction between mid 2017 and post election mid 2019. It remains a mystery as to how long this market can sustain itself before it reaches a critical correction point however one this is for certain, there has never been a sellers market stronger than now.
Billy Couldwell- NG Farah Real Estate
0416 713 721 | billy@ngfarah.com.au