Buying and Selling in a Falling Real Estate Market – A Review in November 2018.
Real estate agents may have been avoiding this, but it’s about time everyone acknowledged that the Sydney residential real estate market has fallen substantially and the decline is likely to continue for the next year or two. There is a majority consensus for three things:
- The Sydney market peaked in July 2017 after the strongest boom in memory
- In The Lower North Shore, it has since declined by about 8% to 10% and is still falling
- Experts are now predicting a total decline between 15% and 20% over the next two years
Buyer sentiment had back-flipped from FOMO (fear of missing out) to FOPTM (fear of paying too much). The reasons are several: tighter lending conditions, a tax bias against foreign investors and continued sluggish wages growth that is tracking our lower than ideal inflation.
This forecast decline is likely even without the effect of possible changes that are on the horizon. Labor’s plans to change property negative gearing and capital gains tax, likely reduced net immigration and an oversupply of new apartments in some suburbs are all blowing a headwind for prices. Sales activity is very likely to continue to decline as sellers hold off, buyers wait for lower prices and banks tighten the purse strings. The State Government is going to experience a fiscal diet as Stamp Duty income declines. Always an unpredictable tax revenue, this could prompt its restructuring in coming years along the lines of the model currently operating in the ACT. There they are phasing in (over many years) a reduction in Stamp Duty on purchase and an increase in Land Tax for all properties, with the goal of being revenue neutral.
The main justification for a future increase in interest rates would have been an overheated real estate market, so this means this likelihood is further over the horizon and pretty much out of sight. A modest reduction in interest rates is possible during 2019.
So that’s the environment for the next couple of years. What does it mean for sellers now?
There are always sellers and buyers in any market. There are the Five Big D’s for sellers – Death, Divorce, Debt, Departure and Downsize as well a Desire for something Different. It takes extra special skills from an agent to sell in a Difficult market.
The more mature agents have seen difficult markets before and should know what to do. Are auctions a poor idea now or do they have a place? How do you indicate price given the narrow range of price options? Is taking a longer time to sell going to achieve a higher or lower price? Can we save a bit on the marketing and if so, where? These are some of the new questions and we need to know the answers.
The best results will come from agents who don’t need competition to achieve a good price, who can indicate a price that attracts the right buyer, who works to an optimal time-frame and is an expert negotiator at all the steps of the way. We here at Marriott Lane are looking forward bringing all this to your table.