The strong showing recorded since the end of 2008 has slowed right down during August, but experts expect buying activity to ramp up in mid to late spring.
Median house prices fell by 1.45% to $658,500 during August, after losing 1.30% in the month of July, according to Residex. During the past three months, a measly 0.15% growth was recorded, compared to a healthier 2.58% increase in the July quarter. Over the past 12 months ending August, median house prices grew by 9.90%, slower than the 12.64% growth over the year to July.
The unit market followed a similar trajectory, with the median price dropping by 1.16% to $468,000 in August. However, units outperformed houses on a quarterly and year-on-year basis, with median unit price rising by a healthier 1.89% over the quarter and 10.44% over the past 12 months.
The significant pullback among buyers – as shown by auction clearance rates currently sitting below 60% – coincides with the increase in the total number of advertised properties for sale, which is about 3.6% higher than the average during the last year, according to RP Data. The deteriorating housing affordability, combined with the uncertainties over the election outcome have also taken the heat off the property market.
“It is clear that the market is moderating a little but this adjustment does not present as dramatic enough to cause worries,” says John Edwards, CEO of Residex. “I would point out that some lower-growth numbers in August are more normal than not.”
Edwards notes that the August and September data are critical in identifying the likely outcome of our markets over the next 12 months. “It will identify how the market is going to react to the now-high levels of un-affordability which exist in most of our Australian cities. My overall expectation is that September will present some further slowing but as we move from mid to late spring, the market will be stronger. The increased aggressiveness of the Australian trading banks will help to facilitate this outcome.”
Despite the current lull, John McGrath, chief executive of McGrath Ltd, is bullish about the prospect of the market picking up steam during the spring season. “I believe that spring will see the beginning of the market resuming its next phase of the growth cycle following a plateau during winter,” he says. “I strongly disagree with some commentators who have been predicting a major correction in Australian real estate prices. I have heard these predictions on and off for 30 years and I’ve never seen a correction go beyond 20-30% or last longer than 18 months. Neither constitutes a collapse – more so a short term re-pricing or pause in the growth cycle which is indeed a healthy thing. It’s normal for the property sector to experience short periods of high growth followed by shorter periods of market stabilisation in a long-term growth cycle. Real estate markets rarely grow in a straight line.”
McGrath also expects the steady interest rates will re-energise the sub-$2m market this spring, while an improving share market may prompt new activity in the $2m-$4m bracket with patchy growth above $4m for this time.
Michael McNamara, general manager, Sydney /ACT with Herron Todd White, also expects activity will increase as the spring selling season commences, however he warns that properties will not be as easy to sell, particularly in the Lower North Shore. “We know that there’s a fair bit of supply in the premium market in the Lower North Shore. If we see more signboards coming on in the market, the danger is that there will be a glut of properties coming into the market resulting in some pressure in prices.
“I think properties will take longer to sell because the dynamics between buyers and sellers are not likely to be even, so I don’t think sellers are going to be as assured of the same sort of prices as they got in the winter. As a buyer you would be in a good negotiating position because sellers would be competing for buyers and you’re going to be able to drive a good bargain.”
In contrast, McNamara sees the east performing well this spring. “[The] Eastern Suburbs have a shortage of listings and there are a lot of buyers, so the extra activity among sellers is likely to have little effect on prices being achieved. That market should see a dramatic increase in activity.”
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