Market Report: Sydney property will change this Financial Year
While the end of a Financial Year is a chance to look back on the past 12 months, it’s also an opportunity to predict what the next period holds for the Sydney property market.
Amid an unusual year, BresicWhitney managed to deliver our highest volume of sales ever, marking our most successful year as a business. We worked hard to maintain connections between buyers and sellers in a time that threw curveballs at every turn.
We started July in lockdown and operated for 3 months in a heavily restricted environment – as you did too. October and November turned things around, before a spike in COVID cases at Christmas upended people’s plans again.
A total of 1115 BresicWhitney properties changed hands for more than $2.43 billion in sales.
The first half of 2022 brought clarity and confirmation that the market was in for change. While questions remain about what’s next, there are clear themes now driving momentum.
Stock is still very low
In our core Inner Sydney markets, current stock levels remain reduced to an extent that our clearance rates are consistently well above Sydney’s averages. Wherever we’re seeing reduced urgency from buyers, we’re also seeing fewer homes on the market.
For example, last week saw our volume of ‘successful sales’ increase and our volume of ‘new listings’ decrease, while our ‘on-site’ stock was still within 10% of what we were carrying last year.
This could be a different environment if stock levels shot up along with less competition from buyers. We’re predicting this pent-up dynamic at BresicWhitney will continue into September, when vendors often launch their spring campaigns.
As SQM Research Managing Director Louis Christopher recently warned, “Older stock levels are likely to increase from here because there’s a wide gap between buyers and sellers at the moment”.
People are buying
We’re still driving foot traffic to BresicWhitney homes, continually getting 30 buyers through properties on launch weekends, on par with what we see in periods of higher demand. In particular, buyers are enticed in when they identify what they perceive to be ‘real’ value.
With buyers still shortlisting properties and making an effort to inspect, they’re looking for opportunities in a market that isn’t as intense as they’ve been used to.
Overall, open home attendance is still at a healthy level, sitting well beyond the winter numbers of our last ‘normalised’ periods of 2018 and 2019.
Recent benchmarks now more important
For the Financial Year, the wider figures tell us that Sydney house prices finished up 5.9% (on CoreLogic), and 20% above pre-pandemic levels despite rising interest rates.
With a softer sentiment creeping in, the biggest challenge for sellers is to understand what their price benchmark is now, measuring closely with weeks just gone.
As BresicWhitney CEO Thomas McGlynn said this week: “We now need to be benchmarking property prices on what happened this week, 2 weeks ago or in the same month. It’s no longer helpful to show clients what happened in the earlier months of 2022 and expect to have a matching result.”
First homebuyers more relevant than ever
In recent years, incentives for first homebuyers capped out at levels that made them less competitive within Inner Sydney suburbs. With new support in place, we’re seeing first homebuyers re-activated in our core markets for the first time in years.
In New South Wales, they now have the choice to forgo the cost of stamp duty in favour of an annual land tax on property purchases of up to $1.5 million – a price bracket that includes a huge choice of apartments and many ‘first house’ type properties. First homebuyers are using this as an opportunity to re-engage, knowing they don’t have to compete with as many other parties.
On a $1.5m purchase, stamp duty is $67,362, while land tax would be around $3,000 a year. We shouldn’t overlook how much these entry transactions underpin all activity in the market, with 13 BresicWhitney teams putting deals together for sub-$1.5 million homes just last week.
For similar reasons, investors are back
Of course, this also means the savvy end of the investor market is also seeing a resurgence. Typically, this space is made up of people who buy when fewer others are competing, hoping to reap the best opportunities.
Not driven by wish lists and emotion, they’re more focused on the core fundamentals of properties, often traversing listings across our 4 offices from Darlinghurst to Glebe, and Balmain to Hunters Hill.
Post-auction sales are happening
With buyers and sellers having different expectations in an adjusting market, media headlines have been focused on the number of auctions that pass in across Sydney. More than half of our auctions at BresicWhitney last week were negotiated to successful results in post-auction scenarios.
While this reflects the softening conditions, it also highlights that that the auction isn’t the end of a campaign, but often a chance to open serious dialogues with committed buyers, sparking new negotiations. We believe the industry needs to remain committed to unearthing and activating buyers at all stages of a campaign, while this will become more important in keeping people connected with properties until a result is achieved.
The rental space is transforming
In a time when portfolios were shrinking across many Property Management businesses, we managed to substantially grow our offering in the past Financial Year. BresicWhitney now has more clients under management than ever before, regularly leasing homes in numbers that weren’t achievable in the past.
With our vacancy rates below 1% and rental yields increasing, we currently have just 29 homes on offer where we’d normally expect to see 80 or 90 up for lease.
While this is improving the prices we’re achieving, it doesn’t mean all properties are experiencing the same increases. Homes that held their value during the pandemic have remained consistent, while those that took a hit on price have come back 15% or 20%.
We predict we’ll see more of this ‘resetting’ rather than a complete overhaul of the space.
Overall, there are several dynamics at play in the Sydney market that present opportunities for both buyers and sellers. As current themes mature and new patterns emerge, the most likely tone for the remainder of the year is ‘change’.