With the holiday season at an end the Sydney real estate market has returned early with a large number of new properties already being advertised for sale. Typically listing activity will flourish in the week following Australia Day however given the shift in the market many owners are choosing to list early. SBS recently reported that there are currently 31.5% more listings on the market than this time last year.
December 2017 saw the growth in the Sydney market decline by 0.9%, bringing property prices down 2.2% from its peak in August 2017. The Australian Financial Review reported, on the 16th January, that growth has dropped a further 0.2% in the first 2 weeks of this year, while the average days on market has increased from 45 to 47. If this trend continues it would appear that 2018 will see low to negative growth, with many experts predicting a fall between 5% to 10%.
This decline can be attributed the measures put in place by the Australian Prudential Regulation Authority to reduce the debt levels held by banks. The tightening of lending criteria has pushed many investors out of the market while cases of some owner occupier purchasers being denied loans despite holding pre approval have also been reported.
Another factor influencing the early market activity is the disruption to the first quarter selling period as April is effectively a non selling month. With Easter falling in late March and school holidays from the 14th – 30th April there is effectively only Saturday the 7th as a viable auction date.
All eyes will be on the 17th and 24th of February, the first auction dates of this year. Close attention will be paid to the level of buyer activity and engagement in the weeks leading up to these super Saturdays. Strong clearance rates will boost market confidence and set the stage for those looking to transact pre Easter.
Should the results be poor then the market will swing further than the 5% to 10% drop currently predicted.
A further point of interest is the speculation of when the Reserve Bank of Australia will increase the official cash rate. Currently at record lows there is little doubt that they will go anyway but up. Some economists tip the rise to come in late 2018 while others speculate that the current rates will remain into 2020. When the rate does formally increase the market could see a huge correction as many owners will no longer be able to service their loans. An increase of distressed sales could see double digit capital growth losses, triple digit days on market and clearance rates fall well below 50%.