While buyer activity was solid at inspections this weekend the recent media reports of slowing price growth is definitely resonating with buyers who are now facing more opportunities in a market showing signs of increasing supply.
Last week, Louis Christopher, managing director of SQM Research and head of property at Adviser Edge reported that what has changed is that fewer buyers are prepared toaccept the higher asking prices of vendors. “There are fewer buyers in the market because much of the stimulus that was in the system last year has gone. We no longer have low interest rates. We no longer have huge government grants and affordability has deteriorated once again. That said, we do have improved job opportunities and that is one of the factors that will prevent a large-scale housing market crash any time soon. Nevertheless the market has slowed and continues to slow. And that’s why it’s likely that house prices in Sydney will be flat for the rest of the year”
Christopher was supported over the weekend when Tim Lawless, national research director for RPData reported in The Sydney Morning Herald that the strongest growth period in Sydney home values since the end of the property boom in 2003 has come to an end.
Lawless reported “ The slowdown has not been uniform. Expensive properties are leading the slowdown, with the top 20 per cent of Sydney’s market (based on price) falling 2.9 per cent in value over the June quarter. By comparison, the most affordable end of the market saw home values remain virtually the same over the quarter. The broad “middle” of the market saw values increase 1.5 per cent.
The fall in premium home values needs to be seen in context. After a larger-than-average dip in home values in 2008 (premium home values fell 9.4 per cent compared with a fall of 3.6 per cent across the broader market), the premium market bounced back strongly, outperforming all other segments. Home values in the most expensive suburbs were up 28 per cent between January last year and the end of March this year, and the most affordable markets saw a gain of just 10 per cent.
The most expensive markets were boosted by recovering equities markets and improved business conditions which translated into higher buyer confidence in the sector.”
Lawless adds:
“It appears market conditions will continue to favour buyers over the next six months. Official interest rates appear to have stabilised, with the next big test being the inflation figures in late October. Further falls in home values may occur, but the market fundamentals remain reasonably healthy and a correction in home values is not on the cards. This is especially the case since building approval volumes continue to fall, indicating the required supply is unlikely to fulfil demand.”
It now appears we are preparing for a stable market with consistent pricing. While analysts are not seeing price growth over Spring, they are also fairly confident that the market will see any price correction. We now appear to be in one of the most stable price markets in many years.
This should prove comforting to buyers, sellers and the Reserve Bank who should now hold rates steady for the foreseeable future.
Tagged: House prices, Interest rates, Louis Christopher, Reserve Bank, RPData, SQM Research, The Sydney Morning Herald, Tim Lawless
