'Green shoots': early signs of recovery in housing market but risks remain
Sydney’s housing market is showing early signs of recovery but not every city region will escape a fall in prices and some will emerge from the COVID-19 crisis faster, economists warned.
Green shoots are beginning to emerge in parts of Sydney’s property market, suggesting doomsday predictions of a housing crash may have jumped the gun. Real estate experts said the same patterns that preceded prior housing market recoveries have been reoccurring over recent weeks. This included a rise in auction clearance rates, increased sales in the premium end of the market and a higher rate of sales inquiry.
The early signs of recovery pointed to a buffer for prices that would insulate the market from a collapse, although a return to pre-COVID-19 conditions could take years.
It comes as economists savaged recent predictions of a more than 30 per cent crash in values as “unrealistic” and failing to account for a major drop in listings, which has limited buyers’ bargaining power.
Real Estate Institute of Australia president Adrian Kelly said forecasts of a crash were “fanciful”. “We have a situation where listings are decreasing yet the inquiry level from prospective buyers is increasing … I do not believe that this points to a catastrophic outlook for house prices,” he said.
Realestate.com.au chief economist Nerida Conisbee said a continued market recovery will be long and slow and would not be felt equally across the city. This was repeating a pattern from prior recovery phases where conditions improved in key eastern markets before spreading west, resulting in price falls in some areas and rises in others.“Western Sydney areas still have a lot of housing supply so will take longer to pick up,” Ms Conisbee said.
Recent trends - including auction clearance rates of 66 per cent over the past two weeks, up from about 40 per cent in April - suggested a wipeout in values across the entire market was unlikely, Ms Conisbee said.“Buyer activity has been pushing up since April and search and inquiry levels are recovering,” she said.“Atrocious unemployment figures will slow the recovery down so things won’t be going back to normal quickly but a wholesale collapse is not happening.”
House hunters Tania Tan and Robert Hosker have been looking for a new home after listing their Neutral Bay house on Bent St for sale and said buyer competition was stronger than they expected.“There aren’t many properties for sale and we’ve seen lots of people at open homes,” Ms Tan said. “It seems COVID hasn’t affected (the income) of a lot of the people planning to buy.”
McGrath-Lower north shore agent Claudia Portale said upsizing families were the most active buyers in the market.“Families are looking hoping they can get better value but that’s creating competition for listings,” she said.“It’s not the same competition as last year so don’t need to pay a premium but they’re not getting bargains either.”Among recent predictions was a “worst-case scenario” presented by Commonwealth Bank where unemployment stayed close to 9 per cent until 2022, causing home values to drop by a third over the next three years. The bank said an 11 per cent fall was more likely.US financial commentator Harry Dent predicted a 30-50 per cent drop in values in Sydney and Melbourne. He made similar predictions in 2011 and 2014.
Sydney’s median home price has yet to fall since the country went into lockdown in late March, with prices inching up in March and April, according to CoreLogic.