Saturday marked the opening of the spring property season – even though technically we are still a few days away from spring. With school holidays generally starting on the 24th of September, properties earmarked for Auction with a standard 4 week Auction marketing campaigns either launched this past weekend or will launch next Saturday.
This past Saturday alone, I personally inspected sixteen houses on the North Shore. Many property buyers in the North Shore are upsizing from near the City or Inner West, where larger blocks of land and space in general are traditionally scarce. The numerous excellent public and private schools is also a strong drawcard to the North Shore.
The North Shore offers an interesting backdrop to study the property market and what might be in store this spring for a few reasons:
- The suburbs in the North Shore are well established and therefore generally are quite stable;
- In good or bad economic times, there are always people looking to buy in the North Shore. Which is not always the case in the newer suburbs in the outskirts of Sydney;
- The North Shore offers a great variety of property types for purposes of comparison, ranging from Units, Townhouses, Semi Detached homes, free standing houses and even vacant blocks of land; and
- The Auction method of sale is traditionally very popular in the North Shore and the clearance rates are indicative of the state of the property market.
Based on my inspections of properties on Saturday and the weeks preceding, the following are my observations:
- Inspection numbers are definitely up. Some properties were even crowded, and this has not been the case in the past few months. There was a healthy amount of browsers out there, but it will remain to be seen if these will convert into serious buyers.
- There is still a lot of talk about the global economy. People remain worried about what the rest of the world has in store for Australia. There is still a cautious attitude amongst buyers and this sentiment is likely to linger for as long as there is global uncertainty. This conservative outlook is essentially the new norm amongst property buyers.
- Agents (and Vendors) seem confident once again to list properties for Auction campaigns. Over the last three-six months there has been a trend in the North Shore market to advertise properties as ‘For Sale’ with a list price. This is a significant shift given the area’s pre-disposition for Auctions in the past. This weekend however, I saw the majority of new listings have come on the market as Auction listings. Once again, only time will tell whether these properties will actually be sold at Auction or whether bidders will continue to be reticent when faced by the hammer.
- Selling Agents seemed buoyed by the turnouts, but it is obvious that they still worry if those who come to the Open for Inspections will turn into actual buyers who would be willing to meet their seller’s expectations.
- There is a surprising amount of North Shore entry level properties around the $1 million mark launched this past week. Probably smart homeowners have decided that now would be a very good time to upgrade, given that higher end properties prices remain softer than entry level ones. These entry level properties attracted keen interest at Open for Inspections this weekend.
- The only premium Auction I attended was Passed In with absolutely no bids. While the selling agent had gathered some 75 people to attend (many are neighbours no doubt), not one bid was placed for a property that had been quoted around the $4 million. It did not appear that there were many registered bidders. Those with interest probably still feel that the best deal can be had post Auction and through smart negotiation – which is probably true.
- Selling agents are increasingly talking up the rental yield part of the buying equation. With interest rates set to remain stable throughout the year, the possibility of a rate fall as the next RBA move, fixed rates having been lowered by the major banks, and the flattening yield curve, it is only to be expected that we will see the return of investors to this market. It is more a matter of ‘when’ rather than ‘if’. These investors had started to nibble in early 2011 and are in my opinion likely to return in force within the next 6 months.
All in all it was a good day out there. The lacklustre supply of good property over the last 6 months is fading and buyers are starting to consider buying again. Many risk-averse Sydney property buyers have been waiting on the sidelines since the beginning of the year, fearful of a severe downturn that has not eventuated. Many are now starting to realise that Australia in general and the property market specifically are still quite resilient; and that any downturns are in fact windows of opportunity to either enter the market, upgrade, or invest.
The reality is that fear is often paralysing. Once the fear subsides, buyer confidence will return. It won’t happen overnight. But it will happen.
About Oliver Stier
Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation.