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In numbers
- 74.3 per cent – Sydney’s auction clearance rate for May
- 4.8 per cent – Sydney home value growth since the market trough
- 4.1 per cent – RBA cash rate
Property listings
Sydney home buyers are facing the strongest property market since the latest boom, going up against rapid price rises and strong auction competition not seen since 2021.
Sydney property values lifted 1.8 per cent in May, the city’s highest monthly gain since September 2021, while auction clearance rates have reached their highest level in more than 18 months.
Sydney’s auction market has recorded its strongest clearance rate since the boom. Credit: Peter Rae
But could the boom-like conditions be short-lived? Experts warn an increase in the number of sellers and the cumulative effect of a dozen rate hikes are likely to rein in price growth.
Sydney had an auction clearance rate of 74.3 per cent last month, Domain data shows, the first time above 70 per cent since October 2021. It was higher still in pockets, reaching an exuberant 80.9 per cent in the Ryde region and upwards of 75 per cent in the city and inner south, inner west, north shore and eastern suburbs.
The median home value has rebounded 4.8 per cent to about $1,052,800, as of May, on CoreLogic data that combines houses and units, its highest level in eight months. On CoreLogic’s calculations the weekly clearance rate topped 70 per cent for the past five weeks, also the strongest run since October 2021.
CoreLogic Australia head of research Eliza Owen said the gains showed how quickly the market had turned on the whiff of easing inflation and interest rates, to recuperate about 30 per cent of its peak-to-trough losses.
“The break from rate hikes in January and the pause in April may have added to exuberance in housing market performance, which has also been buoyed by persistently low listings volumes and high overseas migration,” she said.
However, two rate hikes since, and the potential for more, had turned sentiment again, Owen said. There were early signs price gains were losing momentum, and there was a drop in home buyer sentiment in the latest Westpac-Melbourne Institute Consumer Sentiment survey – with the ‘time to buy a dwelling’ index at near historical lows.
“It looks as if we’ll continue to see a decline in the monthly [growth] … and if we have successive rate hikes in the months to come, there is greater risk of prices falling again.”
Eastern suburbs selling agent Alexander Phillips, a partner at PPD Real Estate, has seen an increase in home owners wanting to sell. Some are nervous the market rebound could be short-lived, while others are selling to avoid financial stress as mortgage rates climb.
″A lot more people are more nervous about the market coming off, but also people are nervous of needing to sell with high costs of living and mortgage repayments,” he said.
Buyer urgency was also pulling back, though overall activity was still good.
“It feels like the [price] growth is over for the year, it has definitely levelled out, and I’m expecting it to decline.”
BresicWhitney chief executive Thomas McGlynn said the market was “amazingly strong at the moment”.
He noted a sizeable proportion of buyers were less exposed to rising rates, as equity or family help meant they were less affected by reduced borrowing power.
“It doesn’t affect a lot of people out there buying at the moment. They have generally been in the market for quite some time, or have family members who have been, and that’s where we’ve seen the rise of the Bank of Mum and Dad,” he said.
Stronger clearance rates and prices prompted a recent increase in homes for sale and appraisals, McGlynn said, but growing concern about mortgage stress was also a factor.
He felt there was enough demand to support an increase in supply, but noted any future lift in homes for sale would limit price growth.
Alex Curran and Kelby Mason have put their renovated Newtown terrace on the market. Credit: Dion Georgopoulos
Among those on the market is Newtown home owner Alex Curran, who is selling her family’s renovated three-bedroom terrace through BresicWhitney’s Michael White to upsize.
“We looked at the market and saw there were a few bigger places [for sale locally] … and thought we’re at this point in the market where there’s still a bit of value there, but we could also do well with our property because we have a lovely home,” she said.
Curran has been surprised by the level of competition and prices recently seen for properties in her area, and is hopeful of achieving a good result.
NAB chief economist Alan Oster said the pace of price growth had been surprising, and was a contributing factor to the Reserve Bank’s decision to keep lifting the cash rate, which he now expects will peak at 4.6 per cent, before dropping mid next year.
Oster said price growth had been fuelled by strong migration, low listing volumes, and expectations the cash rate was at or close to a peak, but he expected growth to slow, then level off, as the impact of rate rises flowed through to the market, and housing turnover increased.
“[An important factor] in the changing dynamic of the market … was people thinking the RBA is nearly done and the RBA is trying to say, ‘hey we’re not done yet’.”
Though there were signs of rising mortgage stress, he expected forced sales would be limited as long as unemployment remained low. He previously forecast prices to end the year down 2.2 per cent, before lifting 4.9 per cent next year, off the back of expected rate cuts.
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