Is Winter the new Spring for property sales?
Australia’s real estate market has experienced significant shifts in recent times. Following a sharp decline in housing values, the market has started what appears to be a healthy rebound, with two consecutive months of positive growth.1 As we embrace winter, the outlook for the market remains optimistic, driven by factors such as low competition, rising property prices, high clearance rates, and buyer motivation.
Here we delve into the current state of our property markets and take a look at some of the opportunities and challenges particular to the winter season.
Limited supply spurring competition among highly motivated buyers
The current NSW property market presents vendors with a notable advantage due to historically low listing numbers. With high demand driving buyer competition, selling conditions have strengthened, evident through above-average clearance rates, faster selling times, and reduced negotiation. Nationally, the total number of homes for sale is tracking 28% below the usual levels, creating an opportunity for potential vendors to list their properties now rather than waiting for the traditional spring surge in activity.2
Although we’ve yet to see full confidence return to the market, certain buyer demographics are still highly motivated to enter the market. With low levels of advertised stock, rising clearance rates, and higher property values, buyer concern about missing out on great opportunities could become more pervasive. Additionally, as demand grows due to strong overseas migration and tight rental markets, some renters are expediting their purchasing decisions. The pool of available properties for buyers is currently the smallest it has been in over a decade, amplifying the sense of urgency.
Clearance rates remaining high
We’ve seen auction clearance rates consistently hitting 70% or higher in recent weeks, and property volumes are gradually increasing when they would typically start to decline. These trends, coupled with the upward pressure on housing values, suggest that the market is gaining momentum as we head into winter, rather than slowing down as it normally would. Stronger clearance rates, along with faster selling times for private treaty sales and reduced discounting rates indicate that sellers are regaining leverage in negotiations.
Interest rates and consumer sentiment are still a challenge
However, prospective buyers will continue to face hurdles this year, with relatively high interest rates and stringent loan assessment criteria. Moreover, low consumer sentiment levels may dampen the current exuberance of the market, and a significant lift in property activity may not occur until there is a broader improvement in consumer sentiment.
Economic uncertainty may lead to wavering confidence
Mixed forecasts by economists regarding interest rates contribute to uncertainty and lower consumer confidence levels. Some suggest there may be another pause in interest rate hikes, which could boost consumer spirits and drive an increase in buyer and selling activity, as lower interest rates typically serve as a catalyst for a further uptick in housing values. However, rate cuts are not anticipated in the near future, and there is even speculation of at least one or two further rate increases before the year is out. Nevertheless, any perceived economic stabilisation is likely to prompt increased buyer and seller activity.
Mortgage repayments expected to remain stable
While many economists are anticipating an increase in motivated selling and mortgage arrears in the short to medium term, most homeowners are expected to firmly prioritize mortgage repayments as economic pressures mount. Coming off record-low rates, banks reported 90-day arrears rates of around 0.5% to 0.6% by the end of 2022.3 Although this benchmark is projected to rise, most pundits predict that homeowners will cut back on discretionary spending rather than miss mortgage repayments or resort to selling their homes.
Looking ahead
While spring is historically a season marked by new listings and sales transactions, last year did not see the usual surge in activity and there appears to be a marked shift towards a strong winter season. Despite the current economic climate, our property markets continue to show resilience and promise for sellers. Limited competition, rising prices, high clearance rates, and buyer motivation contribute to a favourable selling environment, and we may see further activity as accumulated supply from potential sellers who have been holding back enters the market.
Such an increase in advertised supply could put pressure on property values and clearance rates as more homes become available, and high interest rates and low consumer confidence are also likely to have a continued impact on our markets. But by leveraging the opportunities open to them, understanding market dynamics and seeking expert advice from their trusted real estate agent, I believe vendors can make well-informed decisions and maximize their chances of success in the current winter market.
[1] https://www.corelogic.com.au/news-research/news/2023/corelogic-home-value-index-further-evidence-australias-housing-downturn-is-over [2] https://www.corelogic.com.au/news-research/news/2023/rising-prices-and-resilience-australias-winter-housing-outlook [3] https://www.rba.gov.au/speeches/2023/pdf/sp-gov-2023-06-07.pdf
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
