Sydneysider Jessie epitomises a persistent breed of first home buyers.
Long locked out of the property market because of escalating prices, they now sniff an opportunity in the cooler market.
“I’ve been looking to buy a property on and off for around three years,” says the 36-year-old IT consultant. “It was an awful experience when the market was booming, as everything was selling at auction and going for $100,000-plus over the estimated price range.”
However, he now faces a “double edged sword” scenario. Prices in Sydney – and southern rival Melbourne – have stabilised, yet there’s less to choose from.
“The market has cooled and prices have dropped (but) there really aren’t many properties being listed,” he says.
“At the very least now, I’m much more optimistic that I could actually purchase a property within my budget, should I be able to find one.”
Jessie’s guarded confidence – and many other hitherto frustrated home seekers – will be tested in the upcoming spring selling fiesta, which is being watched even more closely than normal this year as a key update on market sentiment and whether the two-year housing downturn is over.
Buyers and vendors alike certainly have an added spring in their step since the Coalition’s federal election win, which removed the spectre of a Labor government cracking down on negative gearing and capital gains tax rules. The shock poll was closely followed by the Reserve Bank of Australia’s decision to cut interest rates in two successive months and the banking regulator’s easing of a key loan serviceability buffer, enhancing the affordability sums for buyers.
But expert opinion varies on whether prices have truly bottomed or if they will wilt further as previously reluctant vendors test the market and find muted demand among cautious consumers.
Celebrity Sydney realtor John McGrath says the fillip in on-the-ground sentiment was felt immediately after the May 18 poll.
“The following Saturday inspection numbers jumped from an average of five to ten lukewarm buyers to 20 to 30 determined buyers,” says the founder and executive director of McGrath Real Estate Agents. “In fact, one property in Newtown (in inner Sydney) that had been low on numbers prior to the election had over 80 groups converge on it.”
In its home value index covering the eight capital cities, property research firm CoreLogic points to a “subtle” uptick in prices. In July, the index rose 0.1 per cent following a 0.1 per cent dip in June. While prices have still fallen 7.3 per cent over the last 12 months, the pace of decline has abated to 1.7 per cent over the last three months.
Nationally, the trends are still patchy.
In July, prices in Sydney, Melbourne and Brisbane all rose by 0.2 per cent, but Perth and Adelaide prices declined by 0.5 per cent and 0.3 per cent respectively. Hobart, an outperformer in recent times, ticked up 0.3 per cent, holding its position as the leading capital in terms of annual gains.
“Overall, while there are still pockets of price weakness, most markets are (experiencing) a clear stabilisation,” says Westpac senior economist Matt Hassan. “The main caveat is still around extremely low levels of turnover. Prices will face a key test as turnover lifts heading into the spring selling season.”
Buyers’ agent Jarrod McCabe of Wakelin Advisory says: “There’s certainly fresh optimism at the moment, especially compared to what the Sydney and Melbourne markets have experienced over the last 18 months.”
“You can be optimistic in this market but it really hasn’t been tested yet. You have to be cautious about a great turnaround.”
National Property Buyers director Antony Bucello concurs that the renewed enthusiasm is being tested in a sparse market but believes the downside appears limited. In its latest update, Sydney inner city-focused agency BresicWhitney this week added that tight supply was also working in the favour of some “budding spring sellers” as “buyers respond to that”, pointing to a new suburb record in trendy Annandale.
“If buyers are not looking then they should be,” says Bucello. “My view is we have bottomed out. We have reached the level where it’s only going to improve from here.”
Leading into spring, auction clearance rates – a closely watched indicator – have been encouraging but, once again, it’s based on a limited sample. Bucello notes that 10,000 auctions took place nationally in the first half to June, compared with 16,000 during the same period last year.
“Vendors have decided to sit on their hands and wait for the market to recover, rather than list their properties,” he says.
According to CoreLogic, the national clearance rate of 68.3 per cent over the first weekend in August compares with 54 per cent at the same time last year. McCabe says the improved clearance rate reflects the lack of supply, but he expects the rate to taper back to the mid to high 50s in the heart of Spring, compared with the mid 70s at the height of the boom three years ago.
Across the housing sector, other forward-looking indicators paint a cautionary picture.
The inner-city apartment market is not dancing to the same recovery tune with ongoing oversupply and building quality issues deterring buyers and sellers alike. Developer Ralan Group last month collapsed, elsewhere listed building materials company Adelaide Brighton downgraded earnings guidance for the second time in less than three months, citing a “further softening of conditions” in the residential market.
As almost any retailer would attest to, broader consumer confidence is also weak: the latest Westpac-Melbourne Consumer Sentiment Index shows a “troubling” 4 per cent slump in recent months to a two-year low, despite elevated housing market optimism on the back of the stimulus measures.
The one upside to buyers is that the RBA is unlikely to increase rates in a hurry: the consensus message from economists is the central bank is likely to reduce the official cash rate – currently at a rock-bottom 1 per cent – even further.
One of the most seasoned RBA watchers in the game, Westpac chief economist Bill Evans tips the central bank will further reduce rates 25 basis points in October and then again in February next year.
For policymakers, arguably the positive and negative influences on the housing sector will create Goldilocks conditions: vendors are motivated to sell, with aspiring buyers like Jessie bolstered by the enhanced affordability from low rates and house prices no longer red hot.
“What was a sellers’ market until late 2017 and subsequently a buyers’ market for the ensuing two years has now levelled out to a marketplace that both should enjoy,” McGrath says.
We’ll know for sure when the gavel falls on the most anticipated auction season for some years.
The views expressed are those of the author and do not necessarily reflect those of the Westpac Group.
Tim has been a business journalist for more than 30 years, working for The Australian, Business Review Weekly and the Melbourne Herald. At The Australian he covered banking for seven years and authored the Criterion investment column for more than a decade. Tim is now a freelance business writer and has founded The New Criterion as a separate weekly column. He also writes a column on biotechnology stocks for Biotech Daily and the online small caps website Stockhead.
{"topicSelector":[{"tagId":"newsroom:topics/economy","name":"economy","description":"Explore more Economy insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Economy","url":"/news/topic.economy/"},{"tagId":"newsroom:topics/banking","name":"banking","description":"Explore more Banking insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Banking","url":"/news/topic.banking/"},{"tagId":"newsroom:topics/digital","name":"digital","description":"Explore more Digital insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Digital","url":"/news/topic.digital/"},{"tagId":"newsroom:topics/diversity","name":"diversity","description":"Explore more Diversity insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Diversity","url":"/news/topic.diversity/"},{"tagId":"newsroom:topics/workplace","name":"workplace","description":"Explore more workplace insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Workplace","url":"/news/topic.workplace/"},{"tagId":"newsroom:topics/community","name":"community","description":"Explore more community insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Community","url":"/news/topic.community/"},{"tagId":"newsroom:topics/sustainability","name":"sustainability","description":"Explore more sustainability insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Sustainability","url":"/news/topic.sustainability/"},{"tagId":"newsroom:topics/technology","name":"technology","description":"Explore more Technology insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Technology","url":"/news/topic.technology/"},{"tagId":"newsroom:topics/property","name":"property","description":"Explore more Property insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Property","url":"/news/topic.property/"},{"tagId":"newsroom:topics/westpac","name":"westpac","description":"Stories featuring Westpac corporate news.","title":"Westpac","url":"/news/topic.westpac/"},{"tagId":"newsroom:topics/sme","name":"sme","description":"Explore more Small Medium Enterprise insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"SME","url":"/news/topic.sme/"},{"tagId":"newsroom:topics/innovators","name":"innovators","description":"Explore more Innovators insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Innovators","url":"/news/topic.innovators/"},{"tagId":"newsroom:topics/leadership","name":"leadership","description":"Explore more Leadership insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Leadership","url":"/news/topic.leadership/"},{"tagId":"newsroom:topics/covid19","name":"covid19","description":"Stories influenced by the COVID-19 pandemic.","title":"COVID-19","url":"/news/topic.covid19/"},{"tagId":"newsroom:topics/investing","name":"investing","description":"Explore more Innovators insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Investing","url":"/news/topic.investing/"},{"tagId":"newsroom:topics/startups","name":"startups","description":"Explore more Startups insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Startups","url":"/news/topic.startups/"},{"tagId":"newsroom:topics/personalfinance","name":"personalfinance","description":"Explore more insights about personal finance, financial literacy and financial wellbeing. ","title":"Personal finance","url":"/news/topic.personalfinance/"},{"tagId":"newsroom:topics/agribusiness","name":"agribusiness","description":"Explore more Agribusiness insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Agribusiness","url":"/news/topic.agribusiness/"},{"tagId":"newsroom:topics/scams","name":"scams","description":"Stories about the latest cyber scams news and trends. ","title":"Scams","url":"/news/topic.scams/"},{"tagId":"newsroom:topics/billsbites","name":"billsbites","description":"Explore more insights from Bill Evans at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Bill\u0027s Bites","url":"/news/topic.billsbites/"},{"tagId":"newsroom:topics/data","name":"data","description":"Explore more data insights at Westpac Wire.","title":"Data","url":"/news/topic.data/"},{"tagId":"newsroom:topics/environment","name":"environment","description":"Explore more Environment insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Environment","url":"/news/topic.environment/"},{"tagId":"newsroom:topics/payments","name":"payments","description":"Explore more Payments insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Payments","url":"/news/topic.payments/"},{"tagId":"newsroom:topics/fintech","name":"fintech","description":"Explore more Fintech insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Fintech","url":"/news/topic.fintech/"},{"tagId":"newsroom:topics/politics","name":"politics","description":"Explore more Politics insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Politics","url":"/news/topic.politics/"},{"tagId":"newsroom:topics/career","name":"career","description":"Stories providing career insights, tips and trends.","title":"Career","url":"/news/topic.career/"},{"tagId":"newsroom:topics/social-enterprise","name":"social-enterprise","description":"Stories relevant to or featuring social enterprises.","title":"Social enterprise","url":"/news/topic.social-enterprise/"},{"tagId":"newsroom:topics/indigenous","name":"indigenous","description":"Explore more indigenous insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Indigenous","url":"/news/topic.indigenous/"},{"tagId":"newsroom:topics/regulation","name":"regulation","description":"Explore more Regulation insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Regulation","url":"/news/topic.regulation/"},{"tagId":"newsroom:topics/superannuation","name":"superannuation","description":"Explore more Superannuation insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Superannuation","url":"/news/topic.superannuation/"},{"tagId":"newsroom:topics/wellbeing","name":"wellbeing","description":"Stories featuring wellbeing trends, insights and stories.","title":"Wellbeing","url":"/news/topic.wellbeing/"},{"tagId":"newsroom:topics/westpac-scholars","name":"westpac-scholars","description":"Stories featuring Westpac Scholars. ","title":"Westpac Scholars","url":"/news/topic.westpac-scholars/"},{"tagId":"newsroom:topics/reinventure","name":"reinventure","description":"Explore more Reinventure insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Reinventure","url":"/news/topic.reinventure/"},{"tagId":"newsroom:topics/asia","name":"asia","description":"Explore more Asia insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Asia","url":"/news/topic.asia/"},{"tagId":"newsroom:topics/podcast","name":"podcast","description":"Explore Westpac Wire\u0027s podcast series.","title":"Podcast","url":"/news/topic.podcast/"},{"tagId":"newsroom:topics/history","name":"history","description":"Stories unearthed from Westpac\u0027s private archival collection. ","title":"History","url":"/news/topic.history/"},{"tagId":"newsroom:topics/businesses-of-tomorrow","name":"businesses-of-tomorrow","description":"Stories featuring Westpac Businesses of Tomorrow program winners. ","title":"Westpac Businesses of Tomorrow","url":"/news/topic.businesses-of-tomorrow/"},{"tagId":"newsroom:topics/tax","name":"tax","description":"Explore more tax insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Tax","url":"/news/topic.tax/"},{"tagId":"newsroom:topics/luciscall","name":"luciscall","description":"Explore more insights from Westpac\u0027s chief economist Luci Ellis at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Luci\u0027s Call","url":"/news/topic.luciscall/"},{"tagId":"newsroom:topics/goodpair","name":"goodpair","description":"Explore more Good Pair stories, showing two people making a big difference together. ","title":"Good Pair","url":"/news/topic.goodpair/"},{"tagId":"newsroom:topics/opinion","name":"opinion","description":"Expert opinions and insights. ","title":"Opinion","url":"/news/topic.opinion/"},{"tagId":"newsroom:topics/currencies","name":"currencies","description":"Stories providing currencies insights, tips and trends.","title":"Currencies","url":"/news/topic.currencies/"},{"tagId":"newsroom:topics/deals","name":"deals","description":"Explore more Deals insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Deals","url":"/news/topic.deals/"},{"tagId":"newsroom:topics/veterans","name":"veterans","description":"Explore more insights about defence force veterans at Westpac Wire.","title":"Veterans","url":"/news/topic.veterans/"},{"tagId":"newsroom:topics/analysis","name":"analysis","description":"Expert analysis on economic news and other trends.","title":"Analysis","url":"/news/topic.analysis/"},{"tagId":"newsroom:topics/IWD","name":"IWD","description":"Stories focusing on International Women\u0027s Day, on 8 March annually. ","title":"IWD ","url":"/news/topic.IWD/"},{"tagId":"newsroom:topics/rework","name":"rework","description":"Stories of businesses pivoting in the face of the COVID-19 pandemic.","title":"Rework","url":"/news/topic.rework/"},{"tagId":"newsroom:topics/10Qs","name":"10Qs","description":"\"10Qs with...\" is a series that asks leaders what makes them tick.","title":"10Qs","url":"/news/topic.10Qs/"},{"tagId":"newsroom:topics/commodities","name":"commodities","description":"Insights into commodities markets.","title":"Commodities","url":"/news/topic.commodities/"},{"tagId":"newsroom:topics/quarterlife","name":"quarterlife","description":"Explore more Quarter Life insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Quarter Life","url":"/news/topic.quarterlife/"},{"tagId":"newsroom:topics/shareholders","name":"shareholders","description":"Stories relevant to Westpac shareholders.","title":"Shareholders","url":"/news/topic.shareholders/"},{"tagId":"newsroom:topics/climate","name":"climate","description":"Explore more climate insights at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"Climate ","url":"/news/topic.climate/"},{"tagId":"newsroom:topics/esg","name":"esg","description":"Explore more insights on environmental, social and governance issues at Westpac Wire. Subscribe to the Westpac Wire newsletter to stay in the know.","title":"ESG","url":"/news/topic.esg/"},{"tagId":"newsroom:topics/boardwalk","name":"boardwalk","description":"A series of in-depth podcast interviews with board directors to find out what\u0027s on their minds. ","title":"Board Walk","url":"/news/topic.boardwalk/"}]}