Has Sydney's Market Turned The Corner?
After two consecutive months of price increases, it begs to ask the question, has Sydney's property market turned the corner?
It is no surprise that this recent uptick in prices has many commentators suggesting that the bottom of the Sydney market might well be in place.
While this growth provides some hope that green shoots are starting to once again emerge, we must temper our expectations and take a closer look to determine if this result really is a sign of more positive things to come.
Auction clearance rates
While we all love a good auction, and Sydney has traditionally led the charge in this method of sale; in the current climate, limited weight should be given to this market indicator.
In correcting markets, typically auctions represent a very low number of total listings. Currently, auctions resulting in a sale in Sydney is the highest in the country. While this is usually a bullish sign when looked at in isolation, at such low volumes it should be taken with a grain of salt.
This confused sentiment is reiterated by research expert Jacob Field, CEO of Ripehouse Advisory “the most difficult time in a market cycle to predict with any surety is the top and the bottom. When a market is recovering, we see many market health checks pulling against each other, things are confused.
“We may feel we have found the bottom, but given the fact that we are still seeing softening in the rental market, with yields at a low in the cycle, we feel that any prolonged recovery or market uplift is still a way off,"" said Mr. Field.
Aussieproperty.com portfolio manager, David McElwain agrees, reporting, ""that many on the ground analysts perceive the clearance increase as a “dead cat bounce” which is temporary and will not be reflected going forward into the next couple of quarters.
""The market is still not confident and while clearances are up they are off a much lower base than this time last year. There may be more confidence come Spring, but we anticipate this market will remain static overall for some time.
""Risks are that the market may fall further going forward even though interest rates continue to come down. It is a risky time for investors to look at purchases now as confidence is down, volumes are down, yields are down,"" said Mr. McElwain.
The impact of a strengthened unit market
While overall Sydney values have fallen away from their highs in the last 12-18 months, it must be noted that some segments of the market have continued to make gains throughout this period.
Interestingly it has been unit sales that have stood up well throughout the downturn with some suggesting that a lack of affordable housing is behind the strength in this class of property.
But this only paints one part of the picture. Increased local homebuyers activity in this lower-priced segment, is drawing tenants away from the rental market, resulting in lackluster vacancy rates.
How to navigate a soft rental market
A high vacancy rate and rental market slow down typical of the Winter season means that it is now a tenants' market in Sydney.
One Agency director, Finn Simpson observes that “it's still a tenants' market; rentals are taking longer to lease which means tenants have more choice and therefore prices are not increasing.
""The Winter slow season for rentals is still ongoing, however, owners are getting more used to it and don't expect big numbers through open homes and multiple applications in the first week. ""said Mr. Simpson.
Sydney landlords are being forced to adapt their rental strategies to make the best of the situation.
""Landlords are getting less picky about the type of tenant they appoint and more tenants are disputing rental increases if they are issued without sufficient evidence proving that the increase is fair.
""The best tips I'm giving my landlords in the current market: present your property better than your direct competitors, be proactive in responding to the market if enquiry is low, and reduce your asking rent sooner rather than later, "" said Mr. Simpson.
July snapshot - Sydney in numbers