When Novak Properties agent Lisa Novak pulled up to one of her first open homes for the year she puzzled over the queue of people, thinking that perhaps they were lining up to view a nearby rental property.
Turns out there were 48 groups waiting to visit her listing, a two-bedroom unit in Dee Why on Sydney’s northern beaches. Later, 50 groups turned out for her first open for a Beacon Hill home.
“We didn’t know what the new year was going to bring,” Novak says. “We actually remained open the whole way through and it was busy right throughout Christmas and New Year. [There was] not a lot of stock coming on, but when we started to do our open homes I was floored to see the huge number of buyers.”
Stock that had remained for sale over Christmas was suddenly snapped up as new buyers entered the market, and Novak says prices actually spiked a little.
It’s a breath of fresh air for some agents in the wake of the Domain House Price Report for December 2022, which revealed Sydney house prices fell for the third consecutive quarter in December, down 2.1 per cent and producing the steepest annual decline in the 30-year history of data collection.
Prices in Regional NSW are faring better than in the capital, although there has been a slowdown in momentum and some markets recorded a decline in house values over the final quarter of 2022.
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While the results are sobering, they need to be viewed in the context of the recent upswing, says Domain chief of research and economics Dr Nicola Powell.
“During the upswing, we saw the steepest rate of quarterly growth on record,” Powell says. “We’ve seen Sydney House prices pull back by roughly 11 per cent but they remain substantially higher than what they were before the pandemic property boom.”
While Powell expects Sydney house prices to continue falling in the first half of 2023, the rate of decline has slowed and in December was three times slower than the September quarter.
Unit prices also fell at a slower pace over the December quarter – falling 1.2 per cent and now 6.5 per cent below the 2021 peak – but Powell believes unit prices will hold up better than house prices this year.
“We saw units underperform and they just didn’t see the booming prices that house prices saw in Sydney,” she says. “There is this perception of value that units offer because they didn’t see the extreme rates of growth. Also, with high levels of borrowing costs and the deterioration of borrowing capacity, it has helped to steer demand towards the unit sector, so I think that will help to provide a floor under pricing for units.”
That was certainly the case for Novak’s first Dee Why listing for 2023.
“The two-bedder that I have just sold in Dee Why, I’ve just exchanged it for $885,000,” she says. “In November-December, that same apartment probably would have exchanged for about $830,000 to $850,000.”
Novak says time will tell if these strong results continue, with the “start line” for real estate usually kicking off after Australia Day.
“But we still haven’t seen a lot of stock coming on the market, and we’re still seeing significant buyers in the market,” she says.
“The inventory levels were a lot lower than what we traditionally see in a spring selling season and even though the market had its challenges with the new interest rate cycle, sales still went through,” he says.
Longhurst says stock levels in Paddington while the numbers through open homes have increased dramatically, tripling since late last year.
He says it’s up to agents to help vendors understand the ebbs and flows in stock levels and how they can use this to their advantage.
“Historically, there are particular times in the year where stock levels increase quite a bit so it’s about trying to give your vendors advice around how to potentially avoid those times,” he says. “It benefits them and it can also benefit you as an agent to help bring properties on in a timely manner.”
Longhurst encourages agents to identify qualified buyers.
“Focus on buyers who are bidding at auctions and making offers on different properties,” he says. “You want to make sure that you can connect them with the right home. I feel like … we are somewhere around the bottom of [the current] cycle and I’d be encouraging buyers to take advantage of that.”
At a broader Sydney level, Powell believes we’re past the halfway point of the current downturn and expects prices to start stabilising towards the end of the year.
“I do think it’s going to take some kind of economic spark to drive the next upswing, and that might be a favourable government policy, it might be a change to the lending environment such as removing the serviceability buffer at 3 per cent or it might be a particular incentive or policy for first home buyers,” she says.
Despite a strong start to the year on the Northern Beaches, Novak says prices probably won’t stabilise until interest rates come off towards the end of the year, leaving the current market unpredictable.
“It’s hard to plan ahead because the market is literally a rollercoaster at the moment,” she says. “I’ve actually been sending vendors video footage of my buyers lining up outside open homes and just saying this is an unprecedented amount of buyers for this time of the year, and if you’re thinking of selling now, it’s a great time to be doing it.”
While some vendors are reluctant to spend money on marketing, Novak says she is pushing home owners towards real estate portals like Domain to help build competition.
“My job as an agent is not to save them on marketing, it’s to maximise their sale price,” she says.