02.16.2021 Buying Tips

The Secret Behind Low Stock Levels

The Secret Behind Low Stock Levels

There’s less property for sale in Sydney’s eastern suburbs right now than you’d probably expect.

So why are stock levels low and what does it mean if you’re thinking of buying or selling?

If you’ve been browsing the property listings in early 2021 and you’ve thought to yourself there really doesn’t seem to be a lot for sale, you’re not wrong. In Sydney’s eastern suburbs, property listings are almost as low as they have ever been.

We look at what’s behind the trend of low stock levels and what you should do about it if you’re thinking about buying or selling in today’s property market.

A COVID-affected market

You can’t really talk about any aspect of the property market right now without acknowledging the impact of COVID-19. But it’s not because prices are falling.

When the pandemic first struck in early 2020, activity in Sydney’s real estate market went from red hot to a virtual standstill in no time at all. In May 2020, property listings across Australia fell to an all-time low. This was partly as a result of lockdowns and social distancing restrictions imposed on the real estate industry. It was also because people reacted to the uncertainty of the coronavirus by staying where they were. Few people want to buy or sell when they don’t know whether they’ll be able to continue receiving a salary or paying the mortgage.

By the second half of 2020, when our worst fears about Australia’s economy hadn’t been realised, we started seeing more properties hit the market. However, we never saw a massive surge in listings and the Spring selling season was much quieter than usual, at least when it came to the number of homes on offer. Even now, we simply aren’t seeing as many people putting their home on the market that you might expect after a year of reduced activity.

Part of a longer-term trend

One of the reasons for this is that for some time now, Sydneysiders have been staying in their homes for longer and longer. By May 2019, the average length of homeownership across Australia was 11.3 years for houses and 9.6 years for units. This was an increase of 3.8 years in the average for houses and 2.9 years for units over 10 years. In Sydney, people hold onto their properties for even longer – 12.4 years for houses and 9.6 years for units. People just aren’t moving on as frequently as they once did.

We believe that one of the reasons for this has been stamp duty, which can add dramatically to the cost of buying property. In NSW, stamp duty is linked to the value of a home, so as Sydney prices rose over the past decade, more people had to pay more stamp duty. In January 2021, someone buying a median-priced house in Woollahra at $3.7 million would be up for almost $200,000 in stamp duty – a cost they need to pay upfront. This adds significantly to the cost of upgrading, downsizing or simply making a move from one home to another.

The good news is that the NSW government has proposed to overhaul stamp duty altogether in 2021, which should hopefully help alleviate at least one of the constraints on real estate activity.

The rise and rise of renovating

But high stamp duty costs are just one part of the story. We’re finding that when today’s homeowners find a location they like, they increasingly want to stay there – even as their family expands or they enter a new phase in their life – regardless of the cost of moving on. So another trend we’ve noticed is homeowners being prepared to undertake extensive renovation to increase the footprint of their home or to make it more livable as their circumstances change.

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That means, often by the time properties hit the market today, they’re substantially changed from their original state. Ten or 20 years ago, it wasn’t too difficult to find an original Paddington terrace. Now they’re a rarity.

In other words, there are fewer sales but, when the property does come to market it’s often much bigger and more specced-out than it once would have been.

Off-market sales on the rise

Another overlooked trend we’re seeing contribute to low listing levels in Sydney’s eastern suburbs is the rise of off-market sales. Off-market sales happen when a property that’s for sale doesn’t actually get listed on the property portals or in the major media outlets but is instead marketed only to a real estate agent’s contacts. Because this method of sale lets a vendor maintain privacy and go to market on their terms, we’re finding it’s becoming increasingly popular.

In the past 12 months, more than a third of our property sales have been off-market. That’s $105,275,000 in off-market sales out of our total sales of $307,845,500. This alone takes one-third of our property sales out of the public domain so that they’re not counted in the listings numbers.

And, given we expect the trend for off-market sales to grow, we believe it will have an even stronger impact on publicly-available stock levels in the future.

Buying and selling strategies in a market with low property listings

If you’re selling in today’s market, the good news is that you have options – including the opportunity to sell off-market. With many buyers looking to take advantage of a recovering economy and record low-interest rates, there’s likely to be strong interest in your property. That said, you still need to be realistic about the price you’re likely to achieve – while it may be a sellers’ market, what your home can sell for will still come down to the laws of supply and demand (and, of course, the effectiveness of your real estate agent).

If you’re buying, the strong competition for properties means it pays to act decisively. If a property is a good fit for your needs, be assertive. Don’t wait for someone else to come and make a strong offer that you can’t match. It also pays to establish relationships with real estate agents, so that you get notice of any properties listed off-market and can access what’s for sale outside of Domain or realestate.com.au.

You can sign up to hear about any of our off-market properties here.

Want more?

If you’d like to find out more about the state of the current market or work out a plan of attack for selling your home, get in touch with our team today.