News that the winter property market is heating up is a far cry from earlier in the year when plummeting auction volumes were being reported. So far, the winter of 2017 has seen unseasonably high auction volumes with a 27% rise in properties going to auction across all capital cities compared to the same time period last year. Auction numbers are up 39% in Sydney alone this winter.
Whilst auction volumes surge, clearance rates in Sydney this winter have dropped by nearly 8% on last year. Are we seeing a change in consumer and vendor sentiment? Previously, in areas where prices were growing by $10,000 per month, some prospective vendors were nervous about selling, fearing they may not be able to buy back into their desired area. Perhaps the combination of high auction volumes and lower clearance rates indicate that the tides are changing. This is difficult to prove but vendors may be adjusting their reserve price to meet buyer expectations.
If sellers are realising they’ll need to sell closer to their reserve price, it might not mean that the market is slowing down, simply stabilising.
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Another contributing factor to these high auction volumes is increased supply. The much talked about Sydney housing drought has propelled developers to construct new homes by the tens of thousand over the past 5 years. In FY15/16 alone, more than 30,000 new homes were built in Sydney. Perhaps the market is finally hitting a tipping point and this move towards battling undersupply is finally impacting demand.
Before we mention 'buyer's market' it's worth noting that July 1 brought with it a first home buyer stamp duty exemption for properties valued up to $650,000 in NSW. Prior to July 1 these buyers were stalling and now the market is braced for high numbers of first home buyers to enter the market which may, in turn, see clearance rates creep up again.
It’s too early to say if auction volumes will continue to rise but these changes may indicate that the combination of extra supply and a change in seller expectations might finally improve housing affordability in Australia's hottest market.
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