Australia’s largest city has seen auction clearance rates dive from above 80 per cent into the 30 per cent in a mere matter of weeks.
In Herron Todd White’s latest Month In Review report for May 2020, the real estate group flagged that the NSW capital’s auction clearance rates – which often strongly correlate to property price movements – have “fallen off a cliff”.
According to Herron Todd White, one reason the clearance rate dive appears so exacerbated is the number of properties that were previously scheduled to go to auction which has either been withdrawn for sale via private treaty or taken off the market altogether.
Coinciding with the lower clearance rate is a reduction in the number of new listings – which are down 20.4 per cent year-on-year.
Despite the grim statistics, they have not yet resulted in a measurable or uniform decline in values across the Sydney market, with home values up 0.6 per cent for the past four weeks, which Herron Todd White has observed as the period “when the lockdowns have been at their highest levels”.
Countering this, is the real estate brand’s anecdotal accounts from the city’s selling agents, who are indicating “that values are falling, particularly in some areas and for some price sectors, although not necessarily uniformly within these submarkets”.
A more immediate effect has been seen in the Sydney rental market, where listings have increased and rents have fallen by around 4 to 5 per cent since the COVID-19 crisis began.
This is partly attributable to a number of short-term holiday rentals coming onto the market and properties that have been withdrawn from sale by their vendors with owners who are now attempting to rent them out.
Considering the uncertainty of the current times, it comes as no surprise that Herron Todd White is unable to forecast what the long-term impact of the COVID-19 downturn will be, especially given the “slow” nature of the property market compared to the share market, which has already displayed volatility.
“We are only at the beginning of the impact on the property market, so it is more difficult to see how long and how deep that impact might be,” the report read.
“Should restrictions begin to ease over the next few months, we would expect the property market to start its recovery fairly quickly afterwards.”
It highlighted that the Sydney property market is resilient, as seen by the recovery from the 2017-19 downturn, and with restrictions around public auctions and open for inspections “hopefully” some of the first restrictions to be wound back, Herron Todd White expects the selling process to move to a more normal state in the not-too-distant future.
Despite the optimism, a slower than anticipated return to normal, uncertainty around unemployment figure spikes and the extent of a decrease in short-term immigration will all play a significant role in how quickly the Sydney residential property market can recover.
Combined with potential tax reform implications on both a state and national level – including land tax, stamp duty, negative gearing and CGT – in the lead-up to future elections, “these could have longer-term implications for the property market in the years to come”.