The property market playing field evens – is it now a buyers market?

Now that the housing market is slowing, with national home prices falling for the first time since the pandemic onset in May, can we consider the market a buyer's market?

Demand to buy property greatly outweighed the supply of properties for sale, but as the Spring selling season kicked into gear that changed and the number of properties hitting the market rose quickly.

Ms Eleanor Creagh, Senior Economist of the REA Group shares her insights:

"The housing market is slowing and prices have begun to fall in some parts of the country, with national home prices falling for the first time since the pandemic onset in May.

Potential buyers may be facing worsening mortgage affordability, but new listings remain strong.

This is seeing the balance of power shift.

There is a lot more choice for buyers, particularly in Sydney and Melbourne where total properties available for sale are back above decade averages and prices are falling."

This is evident as last year sellers has the upper hand, and overwhelmingly so.

However, this picture has shifted as the housing market has slowed.

Now buyers are regaining the upper hand in negotiations with vendors having to reign in price expectations.

Ms Creagh further explained:

"Properties are staying on the market for longer with buyers now having more choice and less pressure to move quickly as the fear of missing out has eased.

This has brought a much healthier balance to the market as dynamics shift in favour of buyers, with competition easing and days on site climbing as a result."

Properties are starting to take longer to sell

There has been an increase in listings coming to market since Spring last year, and this has lifted the total stock of properties available for sale.

Of course, such conditions for buyers in Sydney and Melbourne have especially improved, with many more options relative to the last two years given the stock of properties for sale in both cities is now above the decade average.

Ms Creagh noted:

"Mortgage rates have moved higher, and many can no longer borrow the same amount as this time last year, in addition as interest rates are expected to continue to rise prospective buyers not only face higher borrowing costs but have a lot more uncertainty around future borrowing costs than those over the last two years.

This is being reflected in the slowing market and subdued price momentum.

And along with the moderation in potential buyers and increased choice, the sellers’ market is becoming a buyers’ market."

The number of properties selling below the list price has picked up

This is particularly the case in Sydney and Melbourne.

And the share of sales that are being closed below list price has picked up in recent months with vendors no longer holding quite so strong on price expectations as buyer demand eases and prices soften.

Stock listed for sale in Sydney and Melbourne has surged

The trend is still a little different in Adelaide and Brisbane (but to a lesser extent) where the total stock of properties available for sale remains below pre-pandemic levels and below decade averages.

Although, conditions have improved a little in recent months.

Ms Creagh further explained:

"This is one reason why prices are not yet in reverse in these cities, despite having fallen in Sydney and Melbourne.

Competition is tougher, with fewer options for buyers, and vendors are not yet needing to reign in price expectations.

This is also one reason why auction clearance rates have so far held up stronger in these smaller capitals.

This divergent picture can also be seen in sales volumes, which have so far slowed rapidly in Sydney, Hobart, and Melbourne when compared to the same period to date last year."

Although the market is now slowing, the Australian Bureau of Statistics estimates the total value of Australia's dwelling stock has surpassed $10 trillion for the first time.

The data shows a $221.2 billion increase in the March quarter to reach a record $10.2 trillion.

That said, the pace at which dwelling values have surged since the pandemic onset has slowed markedly since last year.

What's ahead?

It appears that Sydney and Melbourne are fast approaching buyers’ market territory, while sellers still hold the upper hand in the smaller capitals.

Ms Creagh explained:

As the uniformity of the pandemic-induced property boom subsides, larger and less affordable markets are slowing more quickly.

While the smaller capitals have to date seen home prices continuing to grow, with activity remaining elevated, this month’s Housing Market Indicators report showed that activity is beginning to slow in larger markets like Sydney and Melbourne.

This is particularly the case for Brisbane, but also Adelaide to some extent.

It’s likely that even the strong growth we’ve seen so far this year in Brisbane and Adelaide will ease later this year, with reduced mortgage affordability weighing on demand and borrowing capacities being constrained as the official cash rate rises.

It means those markets too will see the playing field levelling."

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.