If you follow the property market, I’m sure you’ll agree it has been a turbulent year. Here are a few highlights and some predictions for 2020.
The year started very slowly with auction clearance rates in February being 50%. Market sentiment was subdued with buyers vying for a limited number of properties being offered for sale.
By April there was more activity and auction clearance rates had improved to 65% following the NSW State Election in March.
Clearance rates dipped to 58% as people waited for the outcome of the Federal Election in May. The threat of negative gearing was a major factor together with more stringent lending practices following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
By June, auction clearance rates were still at 54% and it was a buyer’s market. FONGO was evident (Fear of Not Getting Out) with only the most committed vendors listing their property and price discounting, along with increased days on market, becoming the new normal.
On the demand side, buyers were standing on the sidelines and FOBE (Fear of Buying Early) was prevalent as they waited for the bottom of the market to be reached before making an offer.
Come July, things started to pick up with auction clearance rates increasing to 69%. By September and the beginning of Spring, traditionally one of the peak selling times in the property calendar, there were definite signs of growth. On the first Saturday of September, the Sydney auction clearance rate had increased to 82%.
Signs of FOMO (Fear of Missing Out) started to emerge as cashed-up buyers, frustrated after a long period of searching and limited numbers of properties to choose from, became more active. The bottom of the market was reached in June and auction clearance rates, a reliable predictor of market sentiment, continued to improve in October and November as pent up demand and competition between purchasers put upward pressure on prices.
The main catalysts for change included:
- Improved buyer confidence following the re-election of the Coalition Government.
- Three interest rate cuts since June.
- More relaxed lending criteria making it easier to access finance.
On Saturday December 14 the auction clearance rate was 77% in the lead up to Christmas. This is similar to results achieved mid-year, however, the big difference is that the number of properties listed for auction on July 13 was 285 compared to 759 on December 14 reflecting the increasing number of sellers taking advantage of improved buyer demand. Overall, the total number of properties listed is 23% lower than 12 months ago.
This time last year the auction clearance rate was just 41%. What a difference a year makes! The following table shows auction clearance rates in November for the past four years.
Winners and Losers
As you would expect in any market, there have been both winners and losers in 2019. Here are a few from CoreLogic:
- The most expensive properties recorded the largest decline over the past twelve months, but are also recording the most rapid recovery, returning to positive territory in November”.
- Property prices in Sydney increased by 2.7% in November and by 6.2% over the three months to November 2019.
- Property prices have been steadily increasing for the past five months and Sydney dwelling values are up by 1.6% over the past year but are still -8.0% lower than their July 2017 peak.
- For investors, whilst property prices are increasing in value, gross rental yields continue to trend lower due to a mis-match between supply and demand. Added to this is first home buyers now moving out of the rental market due to lower interest rates, easier access to finance and the NSW and Federal Government initiatives.
Residential vacancy rates for rental properties (the amount of time a property is vacant) increased in November to 3.3% compared to 2.8% in the same month last year.
Interest rates are at an historic low and a further cut in interest rates is expected, possibly as early as February.
Auction clearance rates are predicted to remain at the current levels as more sellers come into the market and demand is eased.
With the number of properties newly listed for sale being 13% lower than a year ago, 2020 will be both a buyers’ and a sellers’ market. Forecasts on what will happen to prices are varied but all predictions see prices improving based on the current economic conditions continuing. Here are three outlooks for the new year:
- SQM Research – 10% to 14% by mid-2020 then levelling off in 2021
- CBA – prices to increase by 7%
- Andrew Wilson Chief Economist of myhousingmarket.com.au Sydney’s housing market is on track to recoup the 15 per cent loss in prices suffered during the 18-month downturn early next year and reach a new record high by March.
What it means for Buyers and Sellers
No-one can really predict what will happen in 2020 but the first half of 2020 is shaping up to be similar to the past three months.
If you are a buyer – buy early before prices increase further.
If you are a seller – consider selling before mid-2020 whilst prices are still on the rise.