September marks the start of the spring market and the end of the winter market. In summary, the winter market was a case of two halves.
Coming into winter, the housing market was experiencing unadulterated boom conditions. The feverish mood amongst buyers hit early in the year when the RBA cut interest rates in February and then backed up again in May.
Nearly every sale we conducted between February and early July was competitive. It became common that multiple buyers were trying to purchase the one property within days of the property hitting the market.
Winter is traditionally a season when stock is tight. Throw interest rate cuts into the equation when rates are at already record lows and it’s easy to understand why the market accelerated.
Furthermore, the interest rate cuts in 2015 had a stronger impact than earlier rate cuts for two reasons. The first being the banks did not pass the full rate cuts on to consumers in 2012 & 2013. The second being a 0.25% rate cut represents a bigger percentage when mortgage rates are at 5% than when they were at 7.5%. 7.5% minus 0.25% is 3.3% where as 5% minus 0.25% is 5%. Even though rates are at such low levels, any 0.25% movement, up or down, is still likely to have some effect on the market.
One of the standout sales over winter was the sale of 81 Trafalgar St Annandale that sold for $1,340,000 after 5 parties submitted offers in just 8 days on market.
Just when it seemed prices were unstoppable, events in early July conspired to temper buyer enthusiasm. The Australian Prudential Regulation Authority (APRA) enforced tougher lending standards on residential investors. At about the same time, Greece’s economy threatened to fall apart. Whether it was related or not to these events, a surge of new listings hit the market in late July and August.
Right through August, there were increasing signs each week that property prices in Sydney were moving from a growth phase to a consolidation phase. The most commonly used indicator of the property market is the auction clearance rate. It’s also the most fudged indicator, but that’s another story. In any case, the auction clearance rate declined each week throughout August, hitting a low of
73% for 2015 on August 29, being the last auction day of winter.
Does any of this suggest buyers will find a bargain in spring? Absolutely not. Prices are still up 15% for the year and look set to hold. Any settling of the boom conditions is good for the sustainability of the market.
It’s worth noting that buyer repayment amounts have not increased in line with house prices.
Broadly speaking, finance is 30% lower than 3 years ago and house prices are up 30 to 40% in the same period.
Barring a shock to the system, expect prices to hold relatively well, even if they don’t actually rise during spring.
Sellers looking to sell above the market may find that difficult and buyers chasing a bargain might do more chasing than buying.