Housing market conditions improving heading into the spring: Peter O’Malley
EXPERT OBSERVATION
As the property market continues to recover this spring, buyers and sellers are well advised to focus on five key areas that will largely shape the market’s performance.
Leading into spring, the market conditions seemed to be improving week to week.
The recovery to date has not been linear across market segments. Some niche markets such as inner-city houses have rebounded strongly whilst apartments in suburbia continue to struggle.
Generalised commentary such as ‘Sydney house prices’ won’t help a Birchgrove home buyer nor will ‘inner city apartments’ assist someone looking to downsize to a waterfront apartment.
Stock levels/days on market – vendors benefited whilst buyers were left frustrated by the historically low stock levels over winter.
Market pessimists claimed the economic fundamentals were weak – but when there are more buyers than sellers, vendors hold the advantage regardless of the fundamentals.
Sometimes the market can play the other way – whereby the fundamentals are healthy but the market is over supplied with stock, giving buyers an advantage.
The recovery in Perth will look this way when their State economy shows strong improvement, the housing market will initially lag until excess stock levels are cleared.
CoreLogic monthly index – normally, you would not suggest an index would influence the performance of a market. It is normally the other way around; the market shapes the index’s reading.
The CoreLogic monthly index accurately tracked the downturn and has quickly become the most credible source of the market performance.
In recent months, the index has shown the market tracking positively which then feeds into buyer confidence.
With money being cheap and readily available, buyer confidence is the final requirement for the market recovery to really take hold.
We have already seen many sales that suggest the market recovery is becoming more aggressive and reflective of early 2017.
The CoreLogic monthly index is where many commentators, forecasters and buyers will take their cue.
Rental market – the inner west rental market is falling, across the housing and apartment market. This is likely to impact the market in one of two ways.
Firstly, demand will be muted as investors are less likely to be interested in buying a rental property at a time of falling income.
Secondly, existing landlords may be tempted to sell by the higher sales prices on offer, at a time of lower rental returns. This could potentially add to stock levels (supply).
We have already seen this trend over winter as a disproportionally high number of landlords opted to sell rather than re-let their property as it became vacant.
Bidders per property is without doubt the best metric to measure market depth. During the downturn, finding one fair and reasonable offer was a feat for vendors. This is why many properties were either ‘Prior to Auction’ or were simply ‘Withdrawn’.
When faced with an environment of one or no buyers, trying to engineer a competitive auction is optimistic.
In recent times, the number of bidders has increased enormously. We are regularly seeing up to 5 or 6 bidders per property, highlighting depth in the market which will ultimately push prices higher.
The apartment market has copped an absolute shellacking since the Opal Tower cracked last December.
Interestingly, buyers have still shown a propensity to purchase apartments, albeit with added caution.
If there is one common denominator in the high few profile instances of defects, it is high rise apartments less than 7 years old. This will inadvertently make older, established apartment blocks more appealing to home buyers.
A complete loss of buyer confidence in the apartment market would be catastrophic for the market and the economy. Hopefully this can be avoided.
PETER O'MALLEY is sales consultant with Harris Partners Real Estate Agents and has been successfully selling real estate in Sydney's Inner West since 2000.
