The early indicators are starting to look good for property prices as buyers are starting to show their hands ahead of the Spring selling season.
Across the board, the indicators are starting to suggest that the recent weakness in property markets in many states is starting to scream opportunity for savvy buyers.
The most obvious indicator to date has been the sharp spike higher in the auction clearance rate. Both nationally and in the two major property markets of Sydney and Melbourne.
Auction clearance numbers in Sydney have surged into the 80s for the past two weeks, with last weekend’s preliminary rate hitting 84.7%. While in Melbourne numbers were equally as strong, coming in a touch below 80% at 79.7%.
But what might be even more bullish for property prices is the fact that the combined capital cities clearance rate was above the 70% mark for the third straight week. Importantly, this was the first time this has happened since May 2017. Which is right around the time that property prices were peaking and demand was surging to unprecedented levels.
Admittedly, we are still seeing relatively low volumes. The volume of houses going to auction was down around 20% on the same time last year based on last weekend’s figures. There are a few reasons for this.
Firstly there has been a fair few negative headlines and worries in the market in the last six months. One of the key worries for both buyers and sellers had been the proposed killing off of negative gearing by the Labor Government in the lead up to the last Federal Election earlier this year. At the same time, until recently we’ve had APRA keeping lending restrictions incredibly tight. Making it difficult for new buyers to access money.
We’ve also had a few quirks in the calendar that have made it tricky for agents to find the right time to list new properties. Over the last few months, events like ANZAC day and Easter fell on Saturdays, while there was also the previously mentioned Federal election as well as state elections in both NSW and Victoria.
Agents will at times try to avoid auctions on big holiday weekends or around special events as it significantly hurts interest and potential bidders. As recently as this week, we heard from both Domain Group and REA Group (realestate.com.au) who said the same things in their annual earnings reports, which indicated listings had fallen as much as 20% in the past 12-months. But according to both, July marked the seasonal-low and activity had starting to pick back up.
Registered Bidders Are Rising
Despite the headwinds, there are signs that strength is coming back into the market, particularly in Sydney and Melbourne as buyers are starting to quickly realise that they, in fact, now have the power.
This has been highlighted by a sharp increase in registered bidders and the number of groups going through and viewing properties. Agents and auctioneers from across Sydney and Melbourne are starting to report that buyers are becoming both more interested and also more assertive on auction day.
This change in behaviour bodes very well for the turn of the season, which is where we typically see listing numbers surge. Generally speaking, agents use a four-week marketing window in the lead-up to an auction date. That means there are likely many new listings coming onto the market in the next two weeks, with auctions dates aimed at the mid-to-late September period.
So the question will then become, whether the buyers will be strong enough to absorb the oncoming supply.
Anecdotally, the fact there are then 6-7 registered (and active) bidders coming out at many auctions in Sydney and Melbourne at the moment, means that there are buyers with money to spend, who have been clearly missing out in the recent weeks. Particularly on premium properties that are continuing to sell strongly.
It seems that at the moment, buyers are starting to realise that not only do they have the upper hand when negotiating, but there are some real other strong incentives, such as low interest rates, that are making for some very good opportunities.
For one, fixed-rate loans are now at levels not seen ever before in this country. Just this week, St. George (owned by Westpac) has cut their fixed rate products by up to 135 basis points. That has seen fixed rates fall as low as 2.94% p.a. for terms of up to five years.
Given that RBA Governor Lowe has repeatedly come and said that he expects a ‘prolonged period of low interest rates,’ and with home buyers able to lock in rates under 3.0%, the incentives are very high for investors to return to the property market in droves.
Clearly, this is what many buyers are starting to think as well and with the bidders starting to get more aggressive at auction, that really does bode well for the upcoming spring selling season.