Why a 2.3% Price Drop is Good News for the Property Market
Real estate prices in Sydney fell by 2.3% over the December 2015 quarter, sparking a host of "doom and gloom" commentary about an impending real estate crash. However, this price fall came after a few years of unprecedented growth, and Sydney still recorded a rise in prices of 11.5% over the year – the highest for any City nationally. And market listings and auction results for the first few weeks of 2016 have already shown that a slightly less heated property market is good news for buyers and sellers alike. In Sydney, auction clearance rates in 2016 have been well over 75% with plenty of pre-auction and off-the-market sales, first home buyer home loans are on the increase and new listing numbers and buyer inspection attendance numbers are strong – all signs of a healthy real estate market.
The cooling market over the last few months of 2015 meant that many property owners who were considering making a move chose to hold off their decision until they could get a clearer impression of where the market was going. This meant that listing numbers dropped towards the end of the year, resulting in a build-up of buyer demand in a "stagnant" marketplace. However, the New Year seems to have brought confidence back to the market as home owners are putting properties on the market with increased confidence that they will be able to buy as well as sell, and first home buyers who had abandoned their search due to highly-competitive conditions, are now moving back into the marketplace.
Once again, statistics can only show general trends and often miss the realities of life. In the real world, the majority of people sell and buy real estate for lifestyle rather than financial reasons – their house is too big or too small, they are moving interstate or overseas, or they need to capitalise their asset. It’s also important to remember that most people sell and buy within a relatively short time span and therefore will usually make the same sorts of gains on the sale as the increased price they are paying to buy.
On the positive side, the less frantic buyers marketplace coupled with continuing low interest rates is bringing first home buyers back into the market. Figures from the Australian Bureau of Statistics for the end of 2015 show an increase of 0.8% in finance for housing (seasonally adjusted), with a 1.3% rise in loans for owner-occupied dwellings. Investment housing fixed loans fell by 2.4%, reflecting increased interest rates on these types of loans. An increase of 1.3% in the number of financial commitments for new dwellings indicates that other government initiatives such as restricting the first home owner grant to new properties might also be impacting on buyers. And perhaps the most positive indicator that the market has achieved a good balance, the number of first home buyer commitments as a percentage of total owner-occupier housing finance rose to 15.1% in December.
Looking forward, can we expect prices to fall or even crash? Not according to a new property index released by CoreLogic and Moody’s Analytics at the end of February, which is intended to predict how changes in the economy and property sector will affect residential property prices. The CoreLogic and Moody’s Analytics property price index forecasts that Sydney house price growth will be around 2.2 per cent during 2016, with a slight dip in growth in the first half of year followed by stronger upward movement) and a forecast price growth of 1.6% in 2017.
A less volatile market leads to more certainty about price expectations, more private treaty sales and more capacity for agents to negotiate a sale prior to auction or off-market. Forsyth sales consultant Sam Green started the year with a new Artarmon street record set by an off-market sale. The substantial 5 bedroom 3 bathroom character home at 107 Artarmon Road, Artarmon was sold by Sam prior to the commencement of the main marketing campaign for a price in excess of $2.5 million – a new record for Artarmon Road. Sam attributes the sale to his strong commitment to working with buyers as well as his vendors to put together perfect matches that work for both parties – and minimise the stress of the selling process. Forsyth’s extensive database of potential buyers are kept continually informed of market trends and new listings, along with regular personal contact, and VIP inspection invitations for properties that fall within their purchasing criteria.
Author : Virginia Van Ewyk.
