The spring market is typically known as the busiest time of year for real estate agents, vendors, and buyers alike. The new financial year and the buzzing of the bees have some magical influence on everybody so that the market begins to be a hive of activity in itself.
In light of the falls we have seen in the past 18 months for both clearance rates and average selling prices in both major markets of Melbourne and Sydney, just how is the spring market faring in 2019?
Following the most recent rate cut by the Reserve Bank of Australia, taking the interest rate down to a historic low of 0.75 per cent, and a loosening of lending standards by the Australian Prudential Regulation Authority, the market, in general, has shown signs of modest growth in the intervening months up to spring.
According to CoreLogic, September saw its first month-on-month increase in national dwelling values since they peaked in October 2017, while in the week ending September 22, clearance rates in Victoria were up at 79 per cent compared with clearance rates nearly half that figure earlier in the year.
However, expectations of a buyers’ market that would dominate for an extended period have been challenged by indications that vendors have only dipped their toes at the start of spring, creating a lack of supply that has fuelled some unexpected results at auction.
A smaller number of auctions held during this spring market, when compared to last year (last week seeing 803 auctions in Victoria compared to 1031 a year prior), indicates that vendors have not been as confident in the market, nor in macro economic conditions, and may still be carrying some trepidation after the amount of attention that has been given to the weakened market over the past 18 months.
This has had its effect on dwelling values, with some fearing that Melbourne and Sydney are at risk of beginning a new cycle of unsustainable growth. Yet the national dwelling value rise of .8 per cent in September does indicate that this growth may be a little more measured than in the lead up to its peak in 2017.
With unemployment rates in Australia rising in August to a 12-month high of 5.3 per cent, there has also been speculation that the RBA will introduce a further cut to the cash rate on Tuesday. There is near-certainty that this will occur, with markets factoring in two rate cuts by May next year and indicating that banks will pass on between a third to a half of these cuts on to customers. With vendors remaining cautious, keeping supply down, and buyers both buoyed by this year’s macroprudential changes made by APRA and the RBA and in a rush to enter the market in expectation of a new period of growth in the major markets, we may continue to see clearance rates remain high and dwelling values continue to grow.
In the major markets of Sydney and Melbourne, prices remain down on spring last year. Year-on-year dwelling values in Sydney are down 2.5 per cent to see median prices in the city fall to $790,072. Melbourne has seen the same fall of 2.5 per cent year-on-year to reach a median of $626,703. While Sydney saw falls of 1.9 per cent this quarter, Melbourne has reversed this trend and seen a 1.8 per cent increase in the same period. Signs of accelerating growth may see these markets begin to nip at the tails of prices last year.
What is clear is that buyers should not expect the market to see any real falls over spring, and that the slowdown of the market seen in 2018 may be the extent of the correction for some time. The number of hungry eyes at auctions is a testament to the feeling in the market that we should continue to see this growth continue, and that potential vendors may respond to this in the latter stages of spring and early summer in expectation of high demand and a desire to secure a sale before the Christmas period.