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Sydney’s once-weak property market has started to pick up, and a handful of neighbourhoods are even experiencing near-boom conditions.
Although there is no guarantee the downturn is over, better-than-expected results in February are flowing into March amid first-home buyer stamp duty changes and strong demand for the few homes for sale at cheaper prices than a year ago.
Many buyers have been surprised to face stiff competition at auctions this year.Credit:Rhett Wyman
Sydney recorded a 69 per cent auction clearance rate in February, the highest since October 2021 on Domain data, but some pockets posted clearance rates between 70 per cent and 80 per cent.
Sydney’s city and inner south region led the way, recording a whopping clearance rate of 79.7 per cent – up nine percentage points from February 2022.
There were strong results in Blacktown (76.3 per cent), the eastern suburbs (74.8 per cent) and inner west (73.3 per cent).
Most Sydney regions recorded clearance rates higher than 60 per cent, the threshold for a balanced market that reflects stable house prices.
Unrelenting buyer demand has translated into Sydney housing values edging up 0.8 per cent over the four weeks to March 15, separate figures from CoreLogic show.
Even so, the research house is not yet calling the bottom of the market and warned of the risk of further falls.
Interest rates may rise further, previous rate hikes are yet to take full effect, and the economy is likely to weaken this year as unemployment rises and households spend their savings.
BresicWhitney chief executive and director of sales Thomas McGlynn said it was a combination of factors that have driven strong “boom” conditions, including first-home buyer incentives at the same time as low stock levels.
“If you were to pinpoint one change that has occurred that has given a lot of confidence to others was the first-home buyer stamp duty change. It has definitely given a lot more confidence to that demographic of buyers, which has given confidence to other demographics,” McGlynn said.
Since January 16, first-home buyers have up to an extra $66,000 to spend at auction if they opt in to paying annual land tax, driving competition on homes worth up to $1.5 million. NSW Treasury earlier said the change was not expected to have any noticeable impact on prices.
“If you didn’t understand the other macroeconomic conditions we are facing, like high inflation and the international economic conditions, you would say based on the auction clearance rates it’s very, very similar to boom conditions.”
McGlynn also said many buyers were banking on rate hikes coming to an end.
“Many are seeing this as an opportunity to buy and potentially buy at a discounted rate before interest rates come back down.”
Cooleys auctioneer Michael Garofolo said it was a good time to buy, despite interest rate rises, as there were more buyers than sellers in the market.
“With low stock it mustn’t be a good time to sell, so it must be a good time to buy. Low stock tells me vendors are sitting on the sidelines until the market improves.
“When the market was booming, it was a great time to sell. Now we’ve flipped that.”
Price falls from rate rises have encouraged buyers to bid while sellers hold off.Credit:Peter Rae
He said even more affordable parts of Sydney property’s market were performing strongly because rate rises hurt less at lower price points.
Ray White NSW chief auctioneer Alex Pattaro thought even an influx of homes would not soften prices because of the strong buyer pool.
“The buyer pool is enormous. In the last 30 days, we’ve had the highest number of registered bidders in 12 months,” Pattaro said.
“Even if there was an influx of stock we are confident the buyers will keep up with the volume.”
Pattaro said an influx of homes will not be enough to meet buyer demand.Credit:Peter Rae
AMP Capital chief economist Dr Shane Oliver believed the improvement in results could be part of a bump that historically happens during market downswings.
“Even during downturns it waxes and wanes,” Oliver said.
“Prices can edge higher and then come off again. You could argue there’s an element of that now.
“At the moment there’s an element of pent-up demand from people who have been bargain hunting, they’re motivated by falling prices.
“A tight rental market and returning migration could also be adding to the pickup in demand at a time of low supply [of homes for sale].”
Bank economists are predicting another two rate rises before they pause, adding even more pressure to the market.
Oliver believes prices will fall between 15 per cent and 20 per cent peak to trough nationally.
He said he couldn’t rule out the possibility that prices had reached the bottom, but it was unlikely.
“Historically, the single most important factor for house prices is interest rates, and we’re still a fair way away from lower rates at the moment. That’s what makes it really confusing.”
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