Interest rates could continue to rise, previous rate hikes are yet to take full effect and the economy is likely to weaken this year as unemployment rises and households spend their savings.
Thomas McGlynn, BresicWhitney’s chief executive and director of sales, said it was a combination of factors that led to strong “boom” conditions, including incentives for first-time buyers amid low inventories.
“If you had to pinpoint one change that has occurred that has given others a lot of confidence, was the change in stamp duty for the first home buyer. It definitely gave that group of buyers a lot more confidence, which gave confidence to other demographics,” McGlynn said.
Beginning Jan. 16, first-home buyers can spend up to $66,000 extra on the auction if they choose to pay annual property taxes, fueling competition for homes worth up to $1.5 million . NSW Treasury previously said the change should not have a noticeable impact on prices.
“If you didn’t understand the other macroeconomic conditions we’re facing, like high inflation and international economic conditions, based on the auction clearance rates you would say it’s very, very similar to the conditions of a boom.”
McGlynn also said many buyers are betting on an end to rate hikes.
“Many are seeing this as an opportunity to buy and potentially buy at a discounted rate before interest rates go down again.”
Cooleys auctioneer Michael Garofolo said it was a good time to buy despite rising interest rates as there were more buyers than sellers in the market.
“With low inventories, it must not be a good time to sell, so it must be a good time to buy. Low inventories tell me vendors are sitting on the sidelines until the market improves.
“When the market was booming it was a great time to sell. Now we have turned that around.”
He said even more affordable parts of the Sydney property market performed strongly because rate hikes hurt less when prices were lower.
Ray White NSW chief auctioneer Alex Pattaro felt that even an influx of houses would not weaken prices due to the strong buyer pool.
“The pool of buyers is enormous. In the past 30 days, we’ve had the highest number of registered bidders in 12 months,” Pattaro said.
“Even though there has been an inflow of inventory, we’re confident that buyers will keep up with the volume.”
AMP Capital’s Chief Economist, Dr. Shane Oliver, however, believed the earnings improvement could be part of a bump that historically occurs during market downturns.
“Even during downturns, it waxes and wanes,” Oliver said.
“Prices can rise and then fall again. One could argue that there is now an element of that.
“Right now there is some pent-up demand from people who have been bargain hunting, they are motivated by falling prices.
“A tight rental market and recurring migration could also help stimulate demand during periods of low supply [of homes for sale].”
Bank economists forecast two more rate hikes before pausing, putting even more pressure on the market.
Oliver believes prices across the country will fall between 15 and 20 percent from peak to trough.
He said he couldn’t rule out that prices may have bottomed, but it’s unlikely.
“Historically, interest rates have been the most important driver of house prices and we are still a long way from lower interest rates. That makes it really confusing.”
https://www.smh.com.au/property/news/hot-sydney-suburbs-where-the-property-market-is-picking-up-20230315-p5cs8q.html?ref=rss&utm_medium=rss&utm_source=rss_property The Sydney suburbs where the real estate market is picking up