Vendors face some of the toughest selling conditions in years this spring, as stock levels pile up and more buyers retreat from the market amid rapidly rising interest rates, experts say.
Louis Christopher, SQM Research managing director, said competition among vendors was set to intensify as older stock continued to accumulate despite a drop in fresh listings.
“We’re expecting to see a huge rise in total listings this coming month and through spring as older listings build up,” Mr Christopher said.
“I think it’s going to be one of the toughest spring selling seasons overall for sellers as the downturn has spread, with most cities now entering into the downturn.”
In June, listings older than six months rose by 1.6 per cent nationwide, while new listings fell by 5.4 per cent, data from SQM Research shows.
“I do believe spring will be the weakest point in the market and vendors who want to sell are probably in a better position to enter the market now because prices will continue to fall,” Mr Christopher said.
“But for those who want to stay on the sidelines and wait, they need to be prepared to meet the market, as they will be competing with a declining number of buyers.”
Sydney-based vendor Effie Serena, who is selling her family’s home at 2/11B Wrights Road in Drummoyne, in the inner west, said they were going into the market with reasonable expectations.
“We made up our minds to sell when the rates started going up because it’s hard to predict how high they will go and how that will impact the market. It could be worse,” Ms Serena said.
“We’re very realistic, but we’re not desperate to sell. If we get a decent offer, we’re going to sell and pay off our mortgage because I don’t want that hanging over my head, especially with further increases in interest rates. I don’t want a large mortgage.”
Another Sydney-based vendor, Fiona Sannen, also decided to sell to take advantage of the lull in listings to get in front of the competition. The family home at 5 Wrights Avenue, Marrickville, in Sydney’s inner west is set for auction on August 13.
“We’re cautious about going to market a little bit later in the year because the number of properties is going to increase,” Ms Sannen said.
“The fact that we’re a little bit ahead of the spring rush, I’m hoping, is an advantage. The market’s definitely changed in the last six months, so we’re realistic, we’re not expecting to get stellar numbers, but we’re downsizing, so we’re buying in a market where prices are lower.”
Eliza Owen, CoreLogic’s head of research, said home sales had dropped by 15.9 per cent in the June quarter compared with a year ago, reflecting less buyer demand.
“Sales volumes are softening, with higher living costs, higher interest rates and seasonal effects seeing a decline in housing demand,” Ms Owen said.
“With rates only set to move higher in the coming months, this could create more of a build-up in listings campaigns.
“The slower rate of absorption is likely to worsen as rapidly rising interest rates and low confidence dampens buyer activity further, suggesting even as new listings trend lower through winter, total advertised supply is likely to rise through the second half of the year.”
The long sell
Selling conditions have already worsened around the country, with the time it takes to sell a property blowing out by 10 days to 30 days on average over the past three months.
In Sydney, homes are now taking 33 days to sell, up from a recent low of 20 days in the three months to October, indicating more overlap of listings stock and greater options for buyers.
Jack Henderson, Sydney-based buyer’s agent at Henderson Advocacy, said weaker demand had enabled the firm to negotiate a 20 per cent discount on average.
“Buyers are now saving hundreds of thousands of dollars on a million-dollar home compared to November last year,” Mr Henderson said.
But while potential buyers might be in the driving seat, they are also facing worsening mortgage affordability, with the recent rate increases adding about $726 a month to a $1 million home loan, according to a Domain data.
“While prices are falling, the rise in interest rate has also damaged buyers’ borrowing capacity,” Mr Henderson said.
“We’ve recently negotiated a property down from $2.1 million to $1.745 million for a client who was pre-approved for that amount before the rate rises, but when he went back to his broker to confirm that they can still get finance, the clients were told their servicing position has decreased. Unfortunately, they weren’t able to proceed with this transaction.”
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/vendors-face-tough-spring-selling-season-20220726-p5b4ph