Property Market Quarterly Wrap Up

July 29th, 2022 - by Brad Gillespie

Beyond the first few months of the year, Sydney’s 2022 property market hasn’t looked at all like last year’s and we are now, most clearly, in a transitioning market.

It is a more subdued and balanced market that presents good opportunities for buyers and sellers, despite the gloomy headlines.

Those headlines tell us that in the June 2022 quarter, the median Sydney-wide home value slipped -by 2.8%, according to CoreLogic. That means the median Sydney property price is now -3.1% lower than its January 2022 peak.

The changing market is also reflected in the citywide auction clearance rate, which has stood at around 50% since April, and at times has even dipped below it. Again, this represents a big change from 2021 when the clearance rate was consistently over 80% and at times even touched 90%.

Luckily, we’re seeing the inner city and inner west largely buck this trend, and achieving good results.

Inner city and inner west outperforming

Our area has been outperforming the wider average even in today’s changing conditions. CoreLogic reported that, for the week ending 24 July, the Inner West auction clearance rate was 62.5%, indicating a reasonably well-balanced market with some life in it.

That said, the number of auctions was significantly lower than earlier this year, with just 58 homes up for auction across the region during the week.

Price-wise, our area is also holding up better than many others, with Domain releasing the following data about some key inner west and inner city suburbs.

Suburb Property type Value Change in 12 months
Alexandria One-bedroom apartment $699,000 3.2%
Alexandria Two-bedroom apartment $1,000,000 11.1%
Erskineville Two-bedroom apartment $1,610,000 17.1%
Erskineville Three-bedroom apartment $2,015,000 20.6%
Erskineville Two-bedroom apartment $1,048,000 8.0%
Erskineville Three-bedroom apartment $2,015,000 20.6%
Redfern Two-bedroom apartment $1,655,000 18.2%
Redfern Three-bedroom apartment $2,000,000 12.7%
Redfern Two-bedroom apartment $1,065,000 8.7%
Redfern Three-bedroom apartment $1,475,000 34.1%

As Domain’s data shows, generally properties that offer room to move - whether houses or three bedroom apartments - tend to have fared best recently. This is part of a broader trend whereby we tend to be spending more time at home, whether playing - or more likely - working.

Any property with the space for a home office (or even two home offices) remains in high demand, and that’s reflected in the high growth rates. On the other hand, non-differentiated one-and-two-bedroom apartments are attracting less attention.

The impact of rising interest rates

One of the main factors affecting today’s property market is the impact of rising interest rates, which is affecting affordability.

Throughout 2021, the RBA kept the official cash rate at its emergency level of 0.1%. Already this year, the cash rate has been lifted three times so that it now stands at 1.35%. More rises are on the way, with many economists forecasting an official cash rate of 2.5% by the end of 2022. If this happens, we’ll likely see home loan interest rates land at around 5%-6%.

While this may seem high compared with the record low rates we’ve become accustomed to over the past few years, the reality is that this is still below the long-term average. Anyone who took out a home loan before 2016 will have experienced similar conditions and should hopefully be prepared.

While some recent buyers who have taken on a large home loan may find themselves stretched, we're unlikely to see a return to the runaway rates of the late 80s and early 90s. A bigger issue is the uncertainty of knowing when the rate rises will stop.

Until they do, we’re likely to see reduced market activity. Once the rate rises settle, however, we should see a return to greater activity and rising prices.

Greater stock levels

Property prices are always determined by supply and demand and another factor affecting the apartment market is the number of listings. Over 2022, we’ve seen a real increase in apartments coming to market.

SQM data reveals that the number of properties on the market in Alexandria is around 20% higher than the same time last year and double what it was in 2020. This is giving buyers more choice and impacting sales prices, especially for two-bedroom and one-bedroom apartments.

While this isn’t great for property owners, it is welcome news to many first-home buyers, who are likely to find it easier to enter the property market despite interest rate rises - especially in light of generous government first-home buyer policies. It also comes as welcome news to many investors, who we're seeing returning to the market in greater numbers - often lured in by lower prices and higher yields.

Timing the market

That said, any seller needs to remember that 2021 was a period of almost unprecedented growth, fuelled by extraordinarily low-interest rates. What we’re seeing is a return to a more traditional market where there is greater balance between buyer and seller.

This may mean that, if you’re taking a property to market, you need to recalibrate your expectations of your property’s value.

At the same time, if you’re buying and selling then this is probably a better time to do so than last year. Good properties are still selling and you’ll still be locking in most of the gains the property market has made over the past 18 months. You’ll also be able to trade up or down in a more subdued market, where you have less pressure and greater choice.

If you’re looking to buy, our advice is to act when you find something that suits you rather than holding off in the hope the property market will fall further. No one knows for sure where prices are heading - in 2020 many analysts were forecasting property prices to fall by up to 30%. We’ve seen a lot of people miss out on their perfect property trying to ‘time the market’.

In the long run, quality properties in inner Sydney have always proven to be a sound investment.

Want more?

Contact our team today to find out more about how we can help you buy and sell in Sydney’s inner city and inner west.