Sydney’s residential housing market has declined from an August peak, with buyers spooked by potential interest rate rises, according to recent analysis by independent property group RP Data.
More than 2000 Sydney properties were up for auction during October, but clearance rates slumped to 70% from August rates of 74%, says John Wakefield, company research director. He says residential prices have been rising since February, accompanying increasing clearance rates from a low of 55%.
Wakefield says the willingness of buyers to meet the expectations of vendors in a heated property market is on the decline. “Buyers have needed to bid higher, but as the expectation of the mid-year interest rate rise became more certain it started to dampen the market. It looks like the peak was reached in August.”
He says people will continue to rent and be more reluctant to enter into the property market, predicting today’s rate hike to 6.75% to result in falling clearance rates and more subdued bidding.
Melbourne is a different story. Ange Zigomanis, property analyst with BIS Shrapnel, says the August rate rises didn’t greatly affect the Melbourne market, as population growth has helped maintain pressure in the market. “No matter what strong rental growth is coming through, people still need a roof over their heads.”
But he says today’s rates rise will hit Melbourne’s outer suburbs the most. “Outer suburbs are the most sensitive to interest rate rises. People there are on 95% mortgage, so they’ve been a lot more strained. People in the inner suburbs have more equity in their home.”
Mark Armstrong, director of Property Planning Australia, says Melbourne demand has slowed but it is seasonal. He says the Melbourne market naturally softens in spring, with supply almost doubling. “Psychology of the market tells us that more people enter at the beginning of the year rather than end of year. People don’t think now is the time to buy.”
Armstrong says this pattern isn’t followed to the same extent in Sydney, with level of supply more even throughout year, but there should still be a natural softening of the market in winter. He says the real test of the interest rate rise impact will be the first half of 2008.