Cooler conditions in the housing market
According to Pete Wargent, co-founder of Australia’s national marketplace for buyers’ agents, BuyersBuyers, the biggest cuts in the housing market are taking place in Sydney and Melbourne.
Mr Wargent said: “While housing sentiment and transaction volumes have slowed across much of the country, the biggest discounts to date have been seen for single-family homes in Sydney and, to a lesser extent , in Melbourne.”
“The price declines from the absolute market peak in the fourth quarter of 2021 have been most pronounced in the market’s top price quartile, particularly for homes in Sydney.”
“In October and November of last year, open houses were very busy for the summer selling season, and most auctions saw multiple bidders in action.”
“Now the open houses are considerably calmer, and the majority of auction campaigns in Sydney end either with the property being taken off the market or going to auction, to be negotiated afterwards,” said Ms. Wargent.
“We have seen examples of properties selling for 10-15% less than they would have realized at the peak of the market. Sentiment is also cooler in the lower price ranges, but equity quote levels are still relatively low, and discounts in the lower price ranges have generally been more modest to date.
Market downturn phase
BuyersBuyers CEO Doron Peleg said the downturn phase of the market cycle is expected to continue through the remainder of the calendar year and into early 2023.
Mr Peleg said: “With headline inflation expected to reach 6-7% in the second half of 2022, consumer and housing market sentiment is understandably going to be very cautious, with many borrowers having never experienced interest rate hikes before. previously significant interest”.
“The good news for borrowers is that longer term inflation expectations are falling, fuel prices are now coming back down and benchmark bond yields in Australia are around 60 basis points from their highs. “.
Figure 1 – Australian bond yields
“We expect the housing market to bottom shortly after the Australia Day weekend in the New Year, as consumers gain confidence in the upcoming end of the tightening cycle, and with mortgage rates still at relatively low levels in absolute and historical terms.”
“This should leave buyers with a comfortable 6-month window of opportunity to buy well and trade hard in Sydney and Melbourne, potentially buying a quality asset at a reasonable price,” Mr Peleg said.
Stamp duty reform
BuyersBuyers co-founder Pete Wargent said upcoming stamp duty reform in New South Wales would lead to a market recovery led by the bottom of the market.
Mr. Wargent said: “If first-time buyers of homes in price brackets below $1.5 million have the option of waiving stamp duty, it could reduce the deposit and closing cost requirement by 5% and could lead to a rush of buyers into the market, even if it comes to borrowing from “mom and dad’s bank”, as it is colloquially known. »
“Paradoxically, this overdue tax reform signaled so far in advance could lead investors to buy in the same price ranges before the new year, which means that the accessibility advantage is arbitrated rather quickly.”
“Opportunistic investors in the second half of 2022 will likely look to 2-bedroom units in Sydney priced below $1.5m, or houses on the Central Coast or in Wollongong,” Mr Wargent said.
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