Gotta do what you gotta do!

With rising interest rates and increased cost of living, an escalation of distressed property sales was expected.

But so far this has not been the case and has not reached pre-pandemic levels. Why is that?

We know that the cost of borrowing directly influences buyer behaviour. Lower interest rates have historically encouraged home purchases and investment, driving up property prices. Conversely, rising rates can dampen demand, leading to a more balanced market.

As loan repayments have increased the burden on household finances, mortgage holders have troubleshot their way out of difficulty, finding ways to keep the same roof over their head. Employment has been one of the biggest factors enabling cashflow to continue, with some even receiving pay rises. Although mortgage arrears have crept up slightly, we are still not seeing a level of selling under duress that is concerning.

Selling and buying property incurs costs; the majority being stamp duty. Most homeowners are doing their best - and succeeding – to remain in their homes and avoid having to fork out to make a move, hence contributing to the shortage of stock available to purchase.

Discretionary spending has dropped which has other flow-on effects on the economy. Tightening the belt, so to speak, allows income to be redirected towards mortgage payments. For some though, this has not been enough and they have eroded their savings to avoid defaulting on their loan. This cohort may be the one that is finally tipped off the so-called cliff if rates rise again.

The latest “state of the market” snapshot according to CoreLogic appears below:

• The pace of quarterly growth has started to ease, to 1.8% in the June quarter. This is down from 1.9% in the March quarter of this year, and down from 3.3% in the June quarter of 2023.

• The time it takes to sell property has trended a little higher relative to one year ago nationally.

• The vendor discounting trend is smaller than a year ago.

• New listings are in a slight seasonal slowdown, however the flow of new listings is trending 7.8% higher than last year, and 5.1% higher than the historic five-year average.

• Total listings are 17.3% lower than the historic five-year average, highlighting persistent undersupply that has contributed to ongoing value increases nationally.

• The rolling four-week average auction clearance rate trended slightly lower through June.

• Annual growth in rent values slowed to 8.2% nationally. Growth in rents over the month of June slowed to 0.4%, which is the lowest rate of monthly growth rate since September last year.

• Dwelling approvals had a strong 5.5% lift in May, led by a 14.2% lift in unit approvals.

• The value of new housing lending secured fell 1.7% in May. The drop was comprised of a faster fall in owner-occupier lending, which has pushed the share of new investment lending higher, to 37.1%. The May share of investment lending was the highest monthly result recorded since May 2017 (37.5%).

• Annual growth in rent values has slowed to 8.6% in the combined capital cities, which could indicate a slowdown in the rent component of inflation. The biggest slowdowns in growth over the year have been in the unit markets of Sydney, Melbourne and Brisbane.

The Sydney property market in 2024 is navigating a complex landscape shaped by interest rates, economic conditions, and evolving buyer preferences. While the market shows signs of moderation, it remains a dynamic and attractive sector for investors and homeowners.