John McGrath – Why it’s safe to sell in this market
The latest pricing data was surprising to many people, with Sydney home values returning to growth while the rest of the market fell by the smallest margin since interest rates began rising in May 2022.
Sydney home values (that’s houses and apartments combined) increased by 0.3% in February. Meantime, the national home value fell by -0.14%, which is the smallest amount since May 2022. This latest data from CoreLogic is a further signal that we are at or approaching the bottom of this property cycle.
It’s fair to say the market is stabilising at this point in time. Prices are settling at current levels.
There are two reasons for this. Firstly, we’re seeing more demand come back. We’ve seen an uplift in numbers at both open homes and auctions.
Secondly, the number of homes for sale is low. Despite an increase in listings in February, CoreLogic data shows that stock levels are still 12.6% below the five-year average for this time of year.
This is creating a solid supply/demand balance, which is why sellers shouldn’t be afraid to list their homes in today’s market.
CoreLogic notes in its latest report that the combined capital cities weighted average auction clearance rate went into the high 60% range in February, and Sydney’s rate went above 70%. A normal market operates at 60%. So, these strengthening clearance rates give us clear evidence that supply/demand is solid, and in some areas, it might even be favouring sellers now, too.
Of course, prices have pulled back, there is no denying that. So, if you’re thinking of selling, you have to accept that the peak has passed and you won’t achieve the price you would have in late 2021. The consolation for many upgraders though is that you’ll probably sell for a bit less and buy for less. That’s the benefit of upgrading in a market that has cooled. Let me explain how this works.
Say the market in your local area has fallen by 10%. Let’s assume your home was worth $2 million at the peak of the market, and you sell it today for $1.8 million (10% less).
Now you go buy a property that was worth $3 million at the peak but is now worth $2.7 million (10% less). You see the upside? You sell for $200,000 less, but you buy for $300,000 less.
Then when the market rebounds by 10%, your new home goes up by around $270,000, while your old home goes up by $180,000.
Let’s also remember that a home is much more than a financial asset. If you need to sell for personal reasons, such as a growing family or a job relocation, you should go ahead and do it now. Don’t put your life on hold waiting for the market to start rising again.
What’s next is a period of consolidation where prices won’t move much, then we’ll see further upward growth in property values next year.
Even though interest rates are still rising, it’s clear that most buyers and sellers have adjusted to the new market, competition is strengthening and solid prices are being achieved. People are getting on with buying and selling homes as and when their personal circumstances necessitate a move.
The school Easter break is coming up, so if you’re thinking of selling, now is the time to talk to an agent, with the aim of launching your campaign in mid-April after people return from holidays. Sellers can now enter the market with greater confidence knowing the new market levels have been established and a good quality marketing campaign and sales effort should deliver a positive result.