Is A Lack Of Listings Creating A New Sort Of FOMO?

You'd be right if you’ve been wondering whether there isn’t as much real estate for sale in our local area as usual lately.

Property listings in Sydney’s inner city and inner west are a lot lower than they were this time last year.

In fact, depending on the suburb, there were up to 40% fewer properties for sale in June 2023 compared with June 2022.

As the table below shows, this lack of stock is most acute in suburbs such as Marrickville, Erskineville and Redfern, where homeowners are holding onto their properties rather than taking them to market.

* Source: SQM Research

What’s behind today’s low property listings?

We’ve found that it’s uncertainty that negatively impacts stock levels - perhaps more than any other factor.

When people feel confident of their finances and the economy more generally, they tend to be comfortable buying or selling. When the future isn’t as clear as it once was, the reverse is true. For instance, when COVID first struck in early 2020, the first thing that happened was that people began withdrawing their properties from the market so that the number of listings dried up.

For the last year or so, we’ve seen some would-be buyers become concerned about the spiralling cost of inflation, as well as the RBA’s rate rises. Their fear is that if the RBA continues raising rates and prices keep climbing, they won’t be able to afford what they once could.

As these buyers often also need to sell themselves, they decide to hold onto their property rather than sell. This naturally leads to less stock for sale. But the slowing down of listings doesn’t end there. It also begins to impact other people’s decision to list.

That’s because a lot of people who would like to move on and don’t require finance (such as downsizers) are now faced with a situation where there is nothing on the market that they want to buy. So they hold onto their property as well.

Another factor behind today’s low listings is that we’re not seeing a lot of new homes being built. While development may not always be popular, it’s essential in areas with a growing population such as ours.

Rising construction costs and higher interest rates have also impacted the construction sector. We’re not seeing as many new dwelling approvals as we should be in our area.

Why are prices rising then?

Even though some people are holding off buying and selling, not everyone is being put off by rising interest rates.

Some people are in a strong cash position and want to buy now. Other people would like to break free of the rising rental market, take advantage of generous government subsidies and buy their first home.

Some people just want to upgrade and move into their next home because now is the right time for them.

On top of this, Sydney is again taking in a lot of new residents. By the end of 2024, Australia is expected to take in another 700,000 new residents. Many of them will choose to call our city (and local area) home.

These factors are combining to generate new levels of demand.

There’s also strong reason to believe we’re at - or at least near to - the top of the current rate cycle, which is giving more people confidence to buy.

As this happens, we’ve noticed more people become worried about missing out on their dream home. There’s a real fear of missing out (FOMO) gripping some market sectors again, as buyers become concerned that, if they miss out, there won’t be another option for some time.

Auctions are again becoming ultra-competitive, and sometimes we’re seeing more than ten registered bidders for a property - the sign of a genuine boom market.

When will more properties come to market in Sydney’s inner city and inner west?

Now that we’re likely near the top of the inflation and rates cycle, there’s evidence to suggest more properties are coming to market. While June listings were lower than usual, they were up in both April and May - traditional selling months.

We don’t think it will be only newly confident buyers/sellers who list their homes over the coming months. We also expect some investors to list their properties rather than pay higher interest rates, so we're likely to see more stock in the apartment and smaller house market too.

This should help present new options to market and help ease the FOMO that we’re seeing.

This is also supported by CoreLogic’s most recent data. In June, the median Sydney value grew 0.9% - still impressive growth but down from a runaway rate of 1.8% in May.

In short, we believe we’re likely to see more properties come online soon and for buyers to have greater choice. If you’re looking to sell, that could well mean the best time to list is now.

Want more?

If you’d like to know more about buying in Sydney’s inner city and inner west, contact my team today.