Listings flood curbs house prices
Data from CoreLogic shows that the number of dwellings that are listed for sale across Sydney has risen by 5.6% since the start of winter. There has also been 24% growth in new listings.
Total listings across all Melbourne suburbs has also increased by 2.3%, with new listings rising by 29.4%.
CoreLogic’s research director, Tim Lawless, says a large increase in unit listings over the winter months may be contributing to the slower absorption rate of new listings. This has given buyers more choice and bargaining power.
“Even if stock is being absorbed, it’s not as fast as when stock levels were low because buyers now have more properties to choose from. So they can take their time to negotiate a little bit harder to get a property”, he said.
“Vendors are also more willing to be flexible on their prices in order to offload their property”.
Lawless also said that the rise in listings is contributing to slower house price growth:
“It’s not surprising that house prices in markets like Sydney have decelerated from their very rapid rate of growth because the flow of new listings haven’t been absorbed”, he said.
“Sydney’s growth halved from May through to July and we’re not seeing much growth in Melbourne at around 0.5% over the month to date”.
James Price from real estate firm Hudson McHugh notes that more units and town houses are being listed for sale, a trend that may be driven by property investors.
“We’re seeing a lot more units and town houses hitting the market, I think because more investors are offloading their property”, McHugh said.
“Around a third of our listings are units at the moment, and they’re taking so much longer to sell because they’re generally targeted by first-home buyers”.
“These buyers tend to be more scared and they’re slower to make a decision, so the turnover is not as fast as detached homes”.
Thomas McGlynn, chief executive of real estate agency BresicWhitney, said “competition at the lower end is not as strong as what it was at the beginning of the year” as listings have risen.
Meanwhile, prominent Sydney real estate agent, John McGrath, this week warned that home prices at the lower end of the market could fall by up to 5% over the next three to six months as buyers feel the delayed impacts of higher mortgage rates.
“I think lower down in the market, about the median price and below, will probably see, over the next three to six months, a bit of pain, which could cause prices to come back 3% to 5%”, he said.
“I think there are still some risks because a large number of people with fixed mortgages are resetting their interest rates from 2% to 7%. It’s already happening, so I don’t think we’re over the mortgage pain necessarily”.
For what it is worth, I see price growth slowing into next year (but not falling) before accelerating again when the RBA begins cutting interest rates.