PROPERTY TO SPRING INTO ACTIONTom Uhlich
Welcome to the Spring market!
It’s the busiest time of the year for our industry and an exciting time for buyers and sellers, as more properties come onto the market and sales activity increases.
In Sydney, this Spring is going to be very important. The city has experienced a significant shortages of homes for sale all year, and hopefully, Spring will end the drought.
According to the latest stats from CoreLogic, new listings in Sydney are down 27% on last year. By comparison, new listings in Melbourne are down 16% and Brisbane listings are down 5%.
Stock shortages make life very hard for buyers and sellers, because although sellers can usually sell at a premium, the trouble is buying back in. They don’t want to risk having to rent and move house twice, so many hold off.
That leaves buyers having to compete for a very small amount of stock. It’s very frustrating, and sometimes, they have to pay much more to secure their new home.
Eventually, this market stand-off ends and Spring should provide the impetus this year. People love selling in Spring, they love the change of season and they’re generally aiming to buy again in time to enjoy Christmas and the end-of-year school holidays in their new home.
Clearance rates will be an important market indicator to watch this Spring.
Sydney’s weekend clearance rates have been high all year – I’m talking boom-level high – in the 70-80% bracket for most of 2016.
If there’s a substantial lift in stock, it will be interesting to see if the clearance rate holds firm, or starts to fall. A fall would indicate supply is starting to meet or exceed demand.
Over the past few years, the pattern we’ve seen is a rush of new stock in September, with even more homes coming onto the market in October/November, at which point we get a softening in prices. In the New Year, old stock gets absorbed and we go back to a state of demand exceeding supply by around March.
Some time soon, after four-and-a-half years of boom growth in 2012-2015 and steady growth in 2016, that’s going to change. I don’t know if 2017 will be the year in which we see a return to truly normal market conditions, but I can guarantee that change is coming soon. That’s the nature of cyclical markets like property.
One interesting trend for Spring this year is the spike in the number of apartments for sale, mainly in Sydney, Melbourne and Brisbane.
This was entirely expected and it usually always happens after a boom.
When markets boom, developers begin building, but the long process means there’s usually a hangover of great new stock that hits the market after the boom ends. Not only that, there’s also the risk that some people, especially investors who purchased off-the-plan a year or so ago, won’t complete their purchase because they start worrying about the oversupply effect, not just on their asset’s value, but also its rentability. So they sell too, which adds more stock to the market.
New research from CoreLogic shows that across the combined capital cities, about 36% of homes for sale in July were apartments, compared to 26% five years ago.
In Sydney, about 45% of homes for sale were apartments, up from 40% last year and 35% in 2011. In Brisbane, 26% of homes for sale were apartments, up from 22% last year and 19% in 2011. In Melbourne, almost half or 49% of all properties for sale were apartments. A year ago it was 42%, and in 2011, it was 29%.
It might sound like our east coast cities are facing a massive oversupply, but it’s important to remember than the bulk of apartment development right now is centred around CBDs and inner-city suburbs. These are prime locations and highly desirable over the long term. I see great opportunity for apartment owner-occupiers over the next two years. You’ll be spoilt for choice and have negotiating power on your side.
The overall prediction for Spring 2016 is a strong season, with early Spring sellers benefitting most from the shortage of stock that will probably still be felt in September.
There will be a pause in the market over the school holidays in late September/early October, before the bulk of Spring’s new listings come onto the market.