Current Location： Local Lifes Local News Sydney property: rising interest rates the only way to cool hot real estate market
There are two key ingredients ultimately needed for the Sydney auction market to lose its head of steam: common sense and higher interest rates.
Common sense is in serious short supply at the Saturday auction scene, with comparable pricing of recent sales almost pointless.
It will be harder for the banking regulators to curtail the many hot headed owner occupier buyers than it was for them to slow the investor spending spree we saw a few years back. But I’m expecting macro prudential controls that seek higher deposits and higher income requirements for owner occupiers taking loans.
The market’s ultimate cooling will really only come when numerous, rapid, home loan rate rises come down the track.
And that will be an extraordinary period to watch, maybe from 2024, although the anxiety will start earlier since four-year-plus fixed mortgage rates have already started to move up. It does seem evident that since the Easter break there has been some understandable buyer fatigue creep into the market.
The chief executive of property portal REA Group Owen Wilson recently noted an emerging caution among buyers when he advised “a little bit of steam” was coming out of the market. He advised buyers had become “a little bit weary” of overpaying in the market.
But when some auctions are seeing unbelievable registered bidders – upwards of 40 parties in some cases – it is still going to be red hot. And it just takes two to make a competitive auction. Of course this is not just a Sydney scenario, as the whole country has seen seven monthly gains in a row, according to CoreLogic.
Perth and Darwin are still recovering from 22 per cent and 33 per cent falls respectively between 2014 and 2020.
When the two-bedroom terrace at 95 Marian St, Enmore went to auction in early March, some 19 registered bidders pushed the price to $1.845 million, well above the $1.6 million price guide. There have only been three further Enmore terrace sales advised to realestate.com.au since then in the $1.5 million to $1.9 million range, which would suggest the prospect of 15 buyers still looking, and possibly joined by new intending buyers.
As we head into winter, and its traditional low supply, the prospect of finding the right home for impatient buyers gets tougher until spring.The inability of overseas travel by the big commission, big spending local estate agents might see them – or their junior staff – sign up more listings than usual over winter, in between trips to luxury resorts across Australia.
And at this time in the market cycle, there likely will be many fresh vendors who sign up with absurdly ambitious price hopes given they’ve watched the market soar, and don’t want to miss out.
These listings will be trickier to sell at silly prices, especially if they are what the market sees as B-grade stock.
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