06.15.2021 Local News

Has The Property Market Cooled?

Has The Property Market Cooled?

There’s been a bit of talk recently about a slowdown in the property market.

Does it reflect reality?

Some commentators have declared an end to Sydney’s hot property market. But are they being premature? We explore what’s really happening in the eastern suburbs right one to work out whether the market has cooled.

The latest data

March 2021 was a stand out month for Sydney property prices. Over those 31 days, the median home value lifted 3.7% according to Core Logic – making it close to the fastest pace of growth ever recorded in our city. By, April, however, growth had fallen to 2.4%, still impressive but as impressive as it had been.

This caused some commentators to question whether our record-breaking growth may be coming to an end.

But then in May, the pace of growth in the Sydney property market picked up once again. We didn’t quite get the numbers we had recorded in March, but we weren’t far off them, with the median Sydney dwelling value rising 3.0% to $928,028. That’s an impressive 9.1% growth for the quarter to 31 May 2021.

But while the answer to whether the property market has cooled may seem to be ‘no’, the reality is a bit more nuanced.

Markets within markets

The first thing to always remember is that in the eastern suburbs property market there are always markets within markets. Property values don’t usually rise and fall in unison.

We’ve already commented on how we’ve noticed a decoupling of the housing market and the apartment market in Sydney’s eastern suburbs. But this is becoming more extreme. Over the year to date, the median Sydney house price has risen 15.1% while the median apartment value has lifted 6.5%. If there is a cooling, it’s the apartment market where it’s likely to happen first.

That said, there are markets within markets when it comes to apartments right now too.

The top end of the apartment market has never been stronger, with downsizers, expats and cashed-up local buyers driving record sales for premium properties.

If we’re seeing any softness, it’s at the lower end and in newer developments, which tends to be driven more by investors. Here, lower yields and fewer new arrivals to Sydney are acting as constraints on price growth.

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The auction clearance rate

Another indicator we always consider when assessing the state of the market is the auction clearance rate. Sydney’s auction clearance rate was close to 90% in March. In May, we began experiencing auction clearance rates below 80% for the first time this year, according to Domain.

But again, this doesn’t necessarily reflect what we’re seeing in our local market.

Here in the Eastern Suburbs, the auction clearance rate remains at 90%, according to the Wentworth Courier. That means nine out of 10 properties that go under the hammer are getting sold. We’d suggest the remaining 10% are usually sold soon after.

What is interesting though, is that properties are selling closer to their reserve price. The Cooley Index shows that in March 2021, vendors were receiving an average of more than $180,000 above their reserve. Now that’s closer to $120,000. Still impressive, but not quite as impressive as it once was.

We believe that what this shows more than anything, is that vendor expectations are rising. When the market took off in early 2021, it caught a lot of sellers by surprise. Now, people list their homes expecting a good result so they set the reserve higher.

Coming into winter

Now that we’re in the cooler months, the property market historically pauses. School holidays, brisker weather and fewer daylight hours all play a part in this. Right now, the Eastern Suburbs property market remains active, with far more buyers than sellers but we believe things won’t be as frenzied as they were at the start of the year and the rate of growth may start to come down.

That is a good thing too. Growth rates of more than 3% a month aren’t sustainable for the long term. We’d prefer to see lower growth rates, with more balance between buyers and sellers.

And we anticipate that’s exactly what will happen between now and Springtime.

Want more?

If you’d like advice on buying or selling in today’s market, get in touch.