After six months of falling prices, there are now signs that Sydney’s property market could very well be reaching a bottom. At least in some of the more premium blue-chip areas.
The latest data from CoreLogic shows that over the month of February, property prices in Sydney increased by 0.3 per cent. This is on the back of values falling 13.4 per cent on an annual basis. Sydney was the only capital city market to see an increase in price over the course of the month.
The growth has really been coming from the upper end of the market, which is something that we have been seeing regularly over the past few weeks on the ground.
According to CoreLogic, Sydney’s upper quartile, recorded a 0.7 per cent rise in values over the month, compared with a 0.2 per cent fall in values across the lower quartile of the market.
Source: CoreLogic
Upper-quartile housing values have led the downturn to date, dropping 13.5 per cent in value across the combined capital cities over the past 12 months, compared with a 1.7 per cent rise in values across the lower quartile. Previous cycles have seen a similar trend, where the upper quartile tends to lead both the upswing and the downturn.
On the ground, one of the main drivers of the rebound in Sydney’s blue-chip property prices has been the lack of quality stock, while demand still remains high. I’ve been saying all the way through the downturn that good quality properties continue to sell and continue to sell well. It’s one of the main reasons I personally look to buy blue-chip properties for my portfolio and encourage my clients to do the same.
Notably, auction clearance rates across Sydney have also been echoing this improved sentiment.
Over the weekend, there were 787 homes taken to auction across Sydney, down from 859 last week and 999 this time last year. While auction volumes were down week-on-week, it was still the second busiest auction week so far this year.
The preliminary clearance rate of 72.1 per cent was higher than last week and has been consistently around the 70 per level for a number of weeks.
Despite the latest interest rate increase, there is clearly still demand there for quality properties. Tight rental vacancy rates and increasing levels of overseas migration are also adding to the buyer pool and that has a tendency to put upward pressure on demand.
While all areas are very different, at the upper levels, it appears that we could be reaching a bottom in the market. As we know, the Sydney market has fallen sharply from the highs and that’s usually the way prices go when borrowing costs rise. The upper end is typically the leader and given that Sydney property prices are so much higher than everywhere else when rates rise, it is usually the leader of the pack.
We’re continuing to see properties selling well at auction with multiple bidders pushing up prices and quality properties selling well over reserve.
As rates rise further there is no doubt going to be pressure on prices and many lower-priced markets in Sydney might well continue to struggle. As will many of the other interstate markets that have experienced large booms. But in the short term it does feel like owner-occupier and investor demand is returning to the Sydney market and this will help deliver a fresh boost of confidence to buyers across the country.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.