Buyers and sellers in 'Mexican standoff'

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The Australian property market slowdown is resulting in a Mexican standoff between buyers and sellers.

Cameron Kusher, senior research analyst at RP Data, told Your Investment Property that caution from buyers combined with a reluctance to sell in a softening market is slowing activity, particularly in Sydney.

"We've got to a point with interest rates where people are hesitant over spending $200, let alone property," said Kusher. "Meanwhile, sellers have realised that it’s not the best time to bring properties to market: we've seen the number of new listings falling in Sydney over the last four to five weeks."

Kusher added that activity from first home buyers and investors remains very low, with the bulk of transactions coming from upgraders. However, he warned that many upgraders were stuck: while they may have located a suitable property to upgrade to, they are experiencing difficulty in selling their existing property.

Kusher added that rental growth was likely to fuel investors' return to the market, as rising rents result in higher rental yields. RP Data is projecting that rents will rise by an average of 7% across Australian capital cities this year.

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