You may have noticed, been frustrated or even exasperated at the Sydney property market of late which has been running hot… experiencing a significant shortage in supply, leading to a highly competitive environment for buyers.
Recent articles by propertyupdate.com.au shed light on the reasons behind this scarcity, with sellers seemingly on strike and property listings declining by 19.8% over the past year. In this blog, we delve into the factors contributing to the supply shortage and its impact on the market dynamics.
Seller Caution and Decreased Listings: Property listings for sale serve as a real-time indicator of seller sentiment and market confidence. This year, sellers have erred on the side of caution, resulting in a downward trend in new listings since spring of the previous year. Year-to-date, listings are down by 11.6%, and when comparing Week 11 of 2023 to both 2022 and the five-year average, the decline is substantial at -29.7% and -22.1% respectively. This cautious approach has created a limited supply of properties available for purchase.
Auction Clearance Rates and Buyer Demand: Despite the limited number of properties available for sale, the Sydney market has seen a notable increase in auction clearance rates. The portion of properties passed in at auction has decreased to its lowest rate since mid-October 2021, standing at 8.9% (down from 11.5% withdrawal rate).
This surge in clearance rates indicates strong buyer demand and a competitive auction environment. Notably, the current clearance rate of 78.5% is significantly higher compared to the same period last year when only 53.3% of Sydney auctions were successful.
The Steady Rise in Property Prices: Although the rate of increase has slightly slowed down, property prices in Sydney are still on the rise. According to propertyupdate.com.au, over the last week, Sydney property prices witnessed a 0.2% increase, while over the past month, they rose by 1.8%. However, it’s important to note that despite these recent increases, Sydney property prices remain 8.2% lower compared to the previous 12 months.
In some areas their have been substantial increases (Northern Beaches of Sydney) in Price range of $2 Million to $4 Million. There is marked competition all over Sydney for property sub $2 Million and even higher below $1.5 Million as this becomes the new entry level for soo many people. Lack of Supply is the dominant factor as buyers compete for a scarcer resource.
Increasing Median Days on Market: The shortage of available properties has led to a longer duration for properties to be sold in the Sydney market. Median days on the market have increased from 26 days in April 2022 to 33 days in April 2023. However, it is important to note that houses tend to sell faster than apartments due to the scarcity of quality properties. A-grade properties, in particular, are selling quickly with minimal discounting, while vendor discounting has seen an increase in certain areas, especially in mortgage belts.
Rental Inflation and its Impact: Another key aspect to consider is the surging rental market, which has witnessed significant growth over the past year. With minimal new supply entering the market in the medium-term, rental inflation is expected to support CPI inflation. This, in turn, could contribute to the stability and potential growth of house prices, further impacting the overall market dynamics.
The rental market has seen significant inflation, which could have an indirect influence on housing prices.
Increased auction clearance rates, driven by high buyer demand, highlight the competitiveness of the market despite the reduced number of properties being listed. Property prices continue to rise even in what is typically a quieter market period coming into winter.
The Sydney property market’s current state reflects the ongoing supply shortage and its impact on market dynamics. Increased auction clearance rates, driven by high buyer demand, highlight the competitiveness of the market despite the reduced number of properties being listed.While these market conditions present challenges for buyers, they also highlight the importance of being proactive, well-informed, and strategic in navigating the Sydney property landscape. Working with experienced professionals to navigate these unique challenges and opportunities could be your winning edge.
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