Cautious optimism for property rebound
New confidence lingers for Sydney property, even before the July rate cut to 1%, people got their first glimmer of recovery this week in terms of figures.
After two years of downturn, both the Sydney and Melbourne markets rose for June 0.1% and 0.2% respectively, according to the CoreLogic home value index.
CoreLogic head of research Tim Lawless summed it up for AFR: “This is really a turning point for Sydney and Melbourne,” he said.
“I think we will see Sydney and Melbourne continue to see a mildly positive change through winter and probably into spring as well, but I don’t think we will see a material or rapid rebound in either of those markets, simply because we are seeing credit conditions are very tight and affordability constraints in those markets are still an impediment to buyers.”
Cautious optimism is our new theme.
That sentiment had already grown amongst both buyers and sellers off the back of recent events. On the front lines at BresicWhitney, light stock levels for inner-Sydney property has added a little more urgency.
Another article doing the rounds this month reported the volume of property trading hands in Sydney is the lowest it has been in seventeen years. In 2016 the numbers were double that of today.
Todays sellers are transacting in a space where competition is reduced. It might not be the strongest market in terms of pricing trends, but other forces are at play.
An interesting sale happened at 38 Walker Street, Redfern, which sold for $1.3 million, after trading 12 months ago for $1.15 million. It became a rare example to defy the price trend for similar timelines.
We’ve seen confident decisions being made from buyers intent on securing something in this part of the cycle. When 9 Coneill Place, Forest Lodge went to auction this month, someone inspected at the last minute, ready to buy, and went on to secure the home for $2.275 million.
Another sale at 41 Iris Street, Paddington was an off-market campaign, with the sellers firm at $1.4 million. We showed people privately on a Saturday, and by Wednesday, both parties had agreed to exchange at the asking price.
Meanwhile, a Balmain East residence sold for $2.65 million to someone we met while showing 2 Mary Place, Paddington. They went through our off-market listings and landed on 17 Paul Street, Balmain East.
These buyers and sellers are more confident about upsizing, moving suburbs, or downsizing now that they’re all experiencing the same cautious optimism.
We spoke to one buyer who secured a townhouse in Rozelle who just wanted a “cheap price bracket near the CBD”.
“We made the decision to look for something cheaper that wasn’t flooded with similar options – on the edge of the city, near parklands, the harbour, bakeries,” they said.
“After the election it felt like a lot of people around us were rushing in. But we thought about the types of things that might protect us from further falls.”
Other eyes on the market echo that sentiment. One mortgage broker told us inquiry was coming from a range of people wanting to know how much they can borrow with under lower interest rates and new conditions.
“People are more positive but not bullish like 2016,” they said. “They’re hopeful that we have seen the bottom of this market and smart buying is now available in the right pockets of Sydney.
“A new wave of first home buyers are hitting the open inspections now. And investors have also started popping their heads up again.”
Despite the welcome headlines, no one is predicting a big rebound, and most economists are pointing to a subdued recovery for the housing cycle.
This tweet from AMP chief economist Shane Oliver was particularly balanced: “Australian home prices likely at/close to bottom thanks to the election outcome, rate cuts and APRA changes… but likely to remain constrained by high debt/income, tighter lending standards, record unit supply (especially Sydney) and rising unemployment. Expect flat prices next year.”
Everyone seems excited to see some normality, in its slow and steady sort of way.