05.15.2024 Buying Tips

How Low Supply Is Impacting Sydney’s Eastern Suburbs Property Market

How Low Supply Is Impacting Sydney’s Eastern Suburbs Property Market

Sydney’s eastern suburbs have some of the country’s lowest listing levels for property, and that’s not a good thing…

Sydney’s eastern suburbs have some of the lowest listing levels of anywhere in Australia, according to a recent SQM Research report. And that’s not necessarily a good thing for our local property market. Here’s why.

How eastern suburbs listings fell to record lows

SQM Research found that the eastern suburbs was one of the most tightly held regions in the entire country (along with the Northern Beaches and Inner West), with just over 0.3% of dwellings listed for sale at any one time.

That means, for every 1,000 properties in our area, buyers should expect only three to be available for sale.

The study also found that some parts of Sydney’s eastern suburbs were more impacted by a lack of stock than others. Those areas with the lowest ratio of listed properties included Clovelly (0.29%), Coogee (0.33%) and Kingsford (0.39%).

Why are stock levels so low?

We think there are several reasons the number of listings in Sydney’s eastern suburbs has fallen so low over the past few years.

  • We’re holding onto property for longer. As a general rule, people are holding onto their homes for longer than they once were. According to research, his phenomenon is happening right across Australia but it’s most acute in Sydney. In fact, CoreLogic has reported that the hold period for houses across Sydney almost doubled between 2002 and 2022 from 5.3 to 10 years. It was a similar story for apartments, with the median hold time rising from 4.3 to 8.3 years over the same period.
  • More people are renovating. Many homeowners who may once have sold their property and upgraded have been choosing to stay put and renovate instead. In fact, in some parts of Sydney’s east, it’s becoming almost impossible to find a home that hasn’t had at least some work done to it over the past 10 or so years. As a result, fewer homes have been coming to market.
  • Stamp (transfer) duty costs have been rising. Stamp duty can be a real barrier to getting on – or moving up – the property ladder. And, here in Sydney’s east, where property prices tend to be high, stamp duty can be a real deterrent to selling – making renovating or making do a more attractive proposition.
  • Lifestyles and expectations have changed. There was a time when someone would enter the property market with an apartment or small home and then sell it the moment they thought about raising a family. In fact, there could sometimes almost be a stigma attached to bringing up kids in an apartment. Today, that’s changed, and more people are willing to stay where they are, prioritise location, and raise a family in a smaller space.
  • Rising property costs. Higher costs also make upgrading less achievable for some buyers, with a widening gap between house and apartment prices also contributing to this.
  • Lack of quality downsizing options. It’s not all one way. A lot of older homeowners would love the opportunity to downsize from the family home and move into something more manageable. However, as we’ve written many times, there aren’t enough quality downsizer-suitable properties in Sydney’s east. This means many would-be sellers hold onto their properties and stay where they are.

Why is a lack of stock bad for the property market?

Too few properties for sale impacts a property market in several ways.

For starters, property values are always determined by the laws of supply and demand, so when supply dips, prices tend to rise. This can help cushion falls in a poor property market, but in a neutral or strong market, it can push prices higher.

This makes it more difficult for people to upsize or enter the market for the first time. And, as we’ve already noted, Sydney is in the midst of a housing crisis.

For buyers, having fewer properties for sale makes it more difficult to find a home that matches their needs. This not only prolongs the property search itself but also means that by the time they do find the right home, they face stiff competition to secure it.

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It’s not necessarily great news for sellers, either. After all, most sellers need to also buy. So, while they may get a higher price for their own home, they may find it difficult to secure the next one.

Besides, they may not achieve a better price in a market with fewer listings. A lack of comparable properties to theirs means buyers won’t be certain of a home’s value and may end up offering less than they otherwise would.

Finally, a lack of stock becomes a self-perpetuating cycle. People thinking of selling hold off because they can’t find a home they’d like to move into. Then, because their home doesn’t get listed, this further reduces the property supply. In other words, not only do they miss out on moving into a new home, another buyer is denied the opportunity to move into theirs.

How to break the cycle of low listings

For a period of low listings to end, generally, one of a few things has to happen.

On the positive side, there could be a sudden uplift in sentiment, with a strong economy encouraging people to list their homes and move on. Once this happens, more people begin to list, too, and the cycle begins to reverse.

Another scenario, however, is that we could see forced sales, with the number of home loan defaults rising and more homes coming online (the so-called mortgage cliff, that many people speculated could happen last year). While there are no signs of this yet, if this were to happen, any increase in transactions is also likely to be accompanied by falling prices.

Finally, the best possible scenario for Sydney is that we see more housing come online so that both the supply and demand curves can rise together. However, given the lack of quality development sites and the high cost of construction right now, this doesn’t seem likely without a lot of creative thinking from both government and developers.

Want more?

If you’re interested in buying your first property in Sydney’s Eastern suburbs, get in touch.