The past 18 months have been a challenging time for eastern suburbs property – although there have been some exceptions.
But there are strong signs now we’re entering into a new type of market, one underpinned by greater confidence and more competition among buyers.
We explore which parts of the market are in demand, what’s likely to happen for the remainder of 2019 and what this means for you if you’re buying or selling real estate in Sydney’s East.
The first quarter of 2019: a falling market
The first quarter of 2019 was generally a slow period for Sydney real estate. In the first quarter of 2019, prices were still adjusting with buyers were unwilling to go hard for a property, even when it ticked every box for them. This was reflected in the auction clearance rates which were consistently under 50% in the early part of 2019.
A low auction clearance rate is natural in a falling market. Buyers become worried about paying even market rates, fearing that if they overpay their property will be worth less tomorrow than it is today. Even when someone intends to purchase, they’re often inclined to let a property pass in at auction and to negotiate with the seller afterwards.
The second quarter: low stock, more stable prices
In the second quarter of 2019, we saw a different type of market – one characterised by more stable prices but also lower stock levels and less activity.
Our experience is that this is what often happens after a period of falling prices. Vendors become less willing to go to market, fearing that they won’t achieve the price they want and buyers struggle to find a property that meets their search criteria.
As supply dries up, this naturally starts to put something of a floor under price falls. Although the lack of confidence in conditions means buyers remain wary of overpaying.
New conditions mean new confidence
In June 2019, however, the market really began to turn around. Stock levels remained low but a new confidence emerged among buyers who became more willing to compete for property.
We believe this was driven in part by stability at the federal level, following the May 2019 election. However, it is also down in part to interest rate cuts and to APRA’s proposed easing of lending restrictions.
This is evidenced by the fact that we are seeing real competition in parts of the first home buyer and investor market – something that has not existed for some time.
Buyers in this segment tend to be more reliant on borrowing to secure their purchase than at the premium end of the market, so rate cuts and lending practices can make a real difference to the amount they have to spend and, consequently, to what they’re willing to offer for a home.
Our forecast: recovery in the sub-$4 million market
We expect the situation to continue to improve in this part of the market, as well as in the market for family homes up to around $4 million.
After all, the right family home in the right position has held up even in the face of a wider downwards trend, as strong results at 16 Holdsworth Street, Woollahra and 19 Ashton Street and 27 Ashton Street, Queens Park proved.
Usually, rate cuts come at a time when the economy is flagging and unemployment is high. That’s not necessarily the case right now. Official figures for March 2019 show the unemployment in Sydney’s East stood at just 3.5%.
Added to this, we’ve already noted that one of the main reasons for the price decline over 2018 and early 2019 was the impact of lending restrictions. If finance becomes more readily available, we’re likely to see more investors and first home buyers enter the market and more people trade up from their first or second home to family homes.
Premium and downsizer market to stay strong
Two segments of the market less impacted by lending are the premium market and downsizer market. For that reason, these market segments didn’t necessarily suffer as much as other property through the downturn.
In fact, the main problem for the downsizer market has always been the absence of quality property. Downsizers today are demanding high quality, spacious single-level living that’s close to transport and amenities. Too few properties in Sydney’s East meet these stringent criteria and we expect competition to stay strong.
As many downsizers tend to fund their purchase with the sale of the family home, we could even see them with more money to spend if the market in family homes gathers more pace.
At the top end of the market, prices are influenced more by factors such as the stock market, economic conditions and the relative value of the Australian dollar than by lending criteria or interest rates. With the share market high and the Aussie dollar low, eastern suburbs property currently looks like good value to many in this bracket.
This means we’ve seen some strong sale recently, including 20b Tivoli Avenue, Rose Bay.
What the current market conditions mean for you
As the property market continues to show signs of recovery, we anticipate that more people will have the confidence to make a strong offer but that more people will also have the confidence to bring their home to the market. This means supply will begin to match demand, acting as a natural brake.
For that reason, we’re forecasting prices to rise over the remainder of 2019 but we don’t think they will rise too sharply and we’re not anticipating the kind of booming market we saw between 2015 and 2017.
We believe that means the next few months are a good time to list – with demand beginning to outstrip stock levels. We also believe that conditions like these lend themselves to selling off-market.
For buyers, expect to see more property matching your criteria on the market come Springtime. However, prepare to compete harder to secure it.
If you’re looking to buy or sell property in Sydney’s eastern suburbs get in touch with my team today.
Alternatively, register for our off-market sales list and be the first to receive notice of any off-market listings we have.
Sydney’s Eastern Suburbs Market Snapshot
A detailed annual assessment of the property market focusing on the Eastern Suburbs of Sydney, Australia.