It’s common to hear that the current real estate is being driven by a lack of properties for sale.
But is that really the case? And if not, what’s really driving prices to unprecedented levels? We look behind the data to find out the extent to which low listings are contributing to today’s price gains.
The data on property listings
In March 2021, there were close to 27,000 properties listed for sale across Sydney according to SQM research. That’s slightly down on March 2020 when there were 29,000 properties listed for sale in Sydney and significantly down on March 2018, when there were over 34,000.
It’s also interesting to compare Melbourne, where, despite a smaller population, there were more than 39,000 properties listed for sale in March 2021. That’s 10,000 or 35% more than here.
On the face of it, this would indicate that there is a real shortage of stock on the market. And, given that property prices are always set by the laws of supply and demand, you might be excused for thinking that it was this lack of stock that was pushing up property prices.
The historical perspective
If that’s the case though, it’s something that’s been happening for a long time, not just the past six months.
The broad theme of Sydney property listings is that they haven’t been high for several years. In fact, our most acute recent shortage was in 2015 when several months saw fewer than 20,000 properties for sale.
So today’s market seems awash with stock when compared to six years ago.
This is consistent with the fact that homeowners are staying put for longer. CoreLogic notes that in 2019, the average time someone owned a house was 3.4 years longer than a decade before. For apartments, it was 2.3 years longer. Put simply, more people are choosing to renovate or make do rather than trading up or down.
A question of demand
That said, what we are seeing right now is a big spike in demand. There are more people looking to buy than we’ve seen in some time.
Open homes are attracting big crowds. In fact, Domain reported that open home numbers lifted 217% between December 2020 and January 2021. It’s also not uncommon to have more than 10 bidders registered to bid at an auction.
Little wonder then that we’re seeing auction clearance rates touching 90% - something that seemed unthinkable just months ago.
The buyers driving the market forward
We believe there are three main groups of buyers contributing to this unprecedented demand.
- First home buyers. With record low-interest rates and generous government incentives, there has rarely been a better time to enter the property market than right now. In fact, in many cases buying your first home is now a cheaper alternative than renting. For this reason, first home buyers are out in force and ABS data shows that loans to first home buyers increased by more than 66% in the year to February 2021. The flipside of this is that, with yields down, investors are staying away.
- Upsizers. These are often buyers who have been spending more time at home due to COVID-19. They’re often looking to find somewhere with more space.
- Downsizers. Downsizers have been an active force in our market for some time. Many are taking advantage of the current boom to sell the family home in the suburbs and move somewhere closer to amenities.
Supply may be similar to where it was last year but the demand curve has become much steeper. That means listings are comparatively lower even if there isn’t much difference in real terms compared to this time last year.
In other words, there are simply more people competing for each property that gets listed. However, there are some great properties on the market right now.
80 Mitchell Road, Alexandria. A three-bedroom minimalist home right near Erskineville Oval.
66 Gerard Street, Alexandria. A fabulous two-bedroom sandstone terrace just footsteps from Redfern station.
30 Copeland Street, Alexandria. Combining Victorian detailing with Scandinavian accents, this four-bedroom terrace provides a light-filled sanctuary from city life.
L28/274 Botany Road, Alexandria. A contemporary two-bedroom two-bedroom apartment in the heart of the sought after ‘Hudson’ complex.
If you’d like to know more about buying or selling in the inner-city and inner west today’s property market, get in touch.