Strong Start to Sydney’s 2020 Spring Selling Season

This year’s beautiful Spring weather has seen Sydney’s auction bidders out in force. September saw a steady increase in auction clearance rates throughout the month, reaching 72% and 70% over the final two weekends, and ticking back up to 72% over the October long weekend. Sydney also saw a healthy 37% increase in total auction listings from this time last year. 

These increasing listings are not keeping up with demand, resulting in cashed-up bidders producing the blowout results that typify a strong housing market. Just last week, 42 Vaucluse Road sold for $24.6 million, a staggering $10.6 million above reserve, setting a new Australian record for the most expensive home ever sold at auction.

Overall, Sydney housing prices declined a modest -0.3% in September and -1.6% for the quarter. The median dwelling value stood at just under $860,000 for an annualized capital return of 7.7% and a double-digit total return of 10.6%. These figures are all well above their national averages.

 

Housing Market Roadmap 2020-2021 

Expect sustainable strength in Sydney’s property market

The worst housing headwind has always been economic uncertainty. A clearer economic outlook gives buyers the confidence to re-enter the market at higher prices and commit to long-term mortgages or investment property financing.

With this in mind, we present our three main reasons why real estate professionals should expect sustainable strength in Sydney’s property market. In order of influence, these are: The Reserve Bank, the Federal Government, and the Big Four Banks.

 

  • The RBA

RBA Governor Philip Lowe has been on the financial front foot throughout 2020. In line with its improved outlook for Australia’s economy, the RBA has kept the cash rate at 0.25%, noting that “there is a very high level of liquidity in the Australian financial system and borrowing costs are at record lows.” The RBA “will maintain highly accommodative policy settings as long as is required and will not increase the cash rate until progress is made towards full employment.” 

In layman’s terms, the RBA is flooding the financial system with money at record low rates for years to come. As a result, the household savings ratio has reached record levels above 16%. 

This money earns almost nothing in term deposits – at some point it will return to consumption or seek higher returns in the housing market.

 

  • The Federal Government

In his October budget, Treasurer Josh Frydenberg announced significant backdated tax cuts affecting the 11 million Australians who make up 95% of the nation’s taxpayers. These cuts, in the range of $2000 to $5000 for singles and couples, equate to months of mortgage or investment loan repayments that otherwise would have been paid in taxes. Politics aside, this is welcome news for the housing market.

 

The Big Four Banks (CBA, Westpac, National and ANZ)

But the biggest news was back on September 24. That’s when Treasurer Frydenberg rolled back a lot of the home loan red tape that arose from the Banking Royal Commission. The unexpected consequence of the Commission’s changes was to make the Big Four Banks extremely risk averse, often denying credit to qualified borrowers and greatly contributing to the housing market slump and credit squeeze of 2018 and 2019.

It’s now the borrower’s responsibility to provide realistic and accurate information about their ability to repay the loan. If borrowers do that and qualify for a loan, the banks should give them that loan. For over two years now, risk-averse banks have turned down credit to borrowers. Easier pre-financing will quickly show up in auction clearance rates. Recent RBA figures are already showing increasing housing loan commitments, particularly for owner-occupied dwellings. 

The Bottom Line

A triple tailwind of record low rates, significant income tax cuts and easier home loan credit should see increased competition for listed Sydney properties. Unit prices have stabilized and housing prices, based on the current 70+% auction clearance rate, can reasonably be expected to appreciate by around 10% over the coming 12 months. 

Any good news on the Covid-19 vaccine front is not priced into the market and could provide a powerful fourth tailwind when international immigration returns to bolster the Sydney market, as it has for over two hundred years. 

 

Contact V-Mark Design

Contact V-Mark Design for all your real estate marketing needs. Our industry-leading suite of professional marketing services is second-to-none. From all the team at V-Mark Design, we wish you continued success throughout the Spring selling season.