Sydney buyers holding the upper hand

House values rose again, albeit slightly, in February and once again certain commentators who voiced doom and gloom price forecasts in pursuit of a headline following the previous month’s minor drop have been left with egg on their faces.

The dynamics of supply and demand are once again instructive. It’s economics 101.

Nevertheless, there’s no price heat in the market at present. Buyers are aware that, in many cases, they are holding the cards, and agents are reporting some interesting trends.

At auction, we are seeing plenty of properties selling prior. This generally happens for one of two reasons. One, the vendor receives a stand out offer. Two, there is only one interested buyer.

In the current market, the latter reason is the more common. It highlights the importance for vendors to work with their agents and get the pricing strategy right to encourage what can be reluctant competition.

Not all campaigns are created equal and there are some strong auctions taking place. This wasn’t really the case in the second half of 2024. It’s dependent on the property, with quality homes suitable for owner-occupiers attracting the most interest at the moment. But there are signs that confidence is growing.

A REINSW member said he has started to see the beginnings of improving confidence.

“Price guiding and price dialogue seems to be absolutely key right now.

“In a price-cautious buyer market, if the price messaging is clean and shows value, and the product is right, the buyers are starting to act a bit more.”

Investors busy selling

Owner-occupiers are the ones dominating proceedings. Investors remain scarce in the market, on the buyer side, that is.

On the seller side, agents report that investment grade stock represents a higher proportion of the properties being sold than normal. Another REINSW member reported that at a recent auction day in Sydney, five of six sellers were investors.

So, will things change as a result of the recent interest rate cut?

Typically, changes to borrowing costs do have an impact but this impact can take time to be felt.

We also have a federal election looming, which traditionally results in many people taking a wait-and-see approach.

There’s no real need for such an approach though. Housing is a key policy battleground but there’s little to differentiate the major parties at the federal level.

Plus, in lieu of tax reform, the most pressing need for the market is an increase in supply and this depends on local and state governments working together to fast-track new homes.

In NSW at least, we’ve seen some attempts by government to unlock potential new supply but new developments still face feasibility challenges. Until conditions are such that the private sector has the confidence to progress their projects, there will be little change on the supply front.

Perhaps, then, the most likely short-term outlook is a continuation of the status quo; relatively flat values, strong interest in well-priced properties, investors selling more than they’re buying, and various pundits making speculative forecasts in order to attract a headline.