Avalanche of hysterical nonsense as Sydney property market continues gradual wind-down
Stand by for an avalanche of hysterical nonsense from mainstream media as the Sydney property market continues its gradual wind-down after four strong years of price growth.
At Hotspotting we’ve been charting a steady decrease in sales activity for at least the past 18 months across the Sydney metro area. This inevitably has led to the slow-down in the price growth rates we are now seeing, alongside a reduction in auction clearance rates.
We’re likely to see a similar scenario to the one that evolved in 2004, following the end of the previous boom, which stretched from 2001 to 2003. Back then there were plenty of predictions of price collapse from attention-seekers, but that did not occur. We simply saw an end to the previous price growth and values flat-lined for a few years.
The evidence to date, both statistical and anecdotal, suggests we’ll see similar things this time. The conditions for significant price decline – economic recession, high unemployment, major oversupply and reckless lending – don’t exist.
The key elements that drove the up-cycle – the strength of the NSW economy, the very high levels of infrastructure spending and the steady population growth – are still as prominent as ever. And of course we still have very low interest rates, though their influence is much less than the chattering economists would have us believe.
But we’ve already seen some doomsayer headlines.
One high-profile commentator, Robert Gottliebsen, claims that values of established apartments have fallen as much as 25 percent in some locations, but I can’t find any evidence of this and neither can anyone else I’ve spoken to.
The consensus from property professionals at the coal-face is that the frenzy has dissipated and market behaviour has moderated, but there is, as yet, no sign of prices dropping. The evidence is that they have stopped rising, generally speaking.
Mainstream media, always a great source of misinformation about property markets, over-reacted to the recent CoreLogic figures that suggested a small decrease in Sydney prices in October. That prompted headlines declaring the end of boom and, in some cases, a likely collapse in values.
It also inspired some of the more shallow commentators, like those at UBS, to rush to be the first to declare the end of “the Australian property boom” – that fictitious entity that exists only in the minds of economists who don’t understand the workings of our many different real estate markets.
Media should know better than to over-react to month-to-month figures, which are notoriously erratic and ultimately irrelevant.
I remember similar mis-interpretations late last year when the month-to-month figures showed a 1.3% drop in Melbourne house values in November 2016. Media shouted that the Melbourne boom was over and values were falling. But the next set of monthly figures showed a 3.3% rise in December, at which point media screamed that the boom was back on. And, with further rises in subsequent months, those strident headlines about the collapse of the Melbourne market were quickly forgotten.
I’ve spoken to a number of respected buyers agents and trustworthy selling agents and no one has seen any sign of the nose-diving values perceived by Gottliebsen in the secondhand apartment market.
The principal of Snowden Parkes Real Estate, Tony Abboud, is as informed as anyone about Sydney apartment markets and he says the reality is the opposite to what Gottliebsen has claimed.
The Australian columnist reckons new apartments are fine but secondhand ones are losing value rapidly. Abboud sees it quite differently. He says more and more buyers are opting for the established product, because it’s more affordable than the new stuff – and that’s underpinning values.
“The existing apartments have been holding up well, because they have lower prices per square metre than the off-the-plan product,” Abboud says. “So it’s made them more attractive. Buyers are also more likely to buy something that’s already built because it offers certainty.
“We are getting 20 or 30 calls a day from buyers. They are taking longer to make decisions, because the urgency has gone from the market, but there’s an intent to purchase.”
Buyers agent Kate Hill from Adviseable has seen no evidence of price decline in the Sydney market.
“The market has eased off but prices are holding at the moment,” she says. “There’s no evidence of a big drop in apartment values. There’s still relatively consistent demand. Markets have come off the boil and a lot more properties are being passed in at auction, but there’s no evidence I’ve seen of price decline.”
Buyers agent Rich Harvey of propertybuyer says that if apartments were selling at a 25 percent discount he would be buying the first that comes on the market, but he has seen no sign of that occurring.
He’s seeing mixed results in the auction market as far as pricing goes: some selling above reserve, some hitting the reserve price and some selling a little under reserve.
“There’s certainly no sign of panic,” Harvey says. “Some vendors are being a bit more realistic and we’re seeing a degree of moderation in the market. It’s not quite a buyers’ market yet, but we are seeing opportunities.”
He says he’s getting more calls from selling agents asking if they have buyers – rather than just opening the door and watching the buyers rush in.
So, all signs point to a market which, unsurprisingly, is running out of puff after sprinting for four years. But we can expect Sydney to keep jogging steadily.
Terry Ryder is the founder of hotspotting.com.au ryder@hotspotting.com.au
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