The figures don't lie - or do they?

The figures look good with positive growth for Sydney housing values reported for the first time since January last year.

But is it all just smoke and mirrors?

After finishing 2022 with the market in decline, things were slow to kick off in 2023. Seasonal activity was down in January and the consensus was that that trend would continue. At least another interest rate increase was on the cards so it was fair to think that prices still had a way to go to reach their nadir.

Sellers have understandably felt uneasy about listing their home for sale in this environment, fearing they may undersell their property. The result of this, as with the onset of COVID lockdowns, was a swing towards decreased supply that outpaced decreasing demand. Capital city listings over the past four weeks were 19.9% below the previous five-year average for this time of the year. 

So while on the surface the market should be losing value, in reality low advertised supply is likely to be a central factor keeping a floor under housing prices and preventing it from slipping further back.  

Adding to this equation is the increase in overseas migration since our borders reopened. Along with supply of stock to buy being tight, the rental market is experiencing very low vacancy rates leading to what is being called a “rental crisis”. This may have the effect of coercing residents away from the rental market and into ownership, putting added pressure on the already deficient housing market and further bolstering values.

Whilst the market is showing some encouraging signs, it’s too early to say it has bottomed out. Question marks over interest rates, supply and affordability prevail leaving even leading experts disagreeing about the future.

One of the key metrics in this cycle to look out for is new market listings. This could be an indication of various factors. Amongst those are:

• Vendors can’t wait for the market any longer to reach the bottom

• Mortgage holders are feeling the pressure of rising interest rates

• Household savings have depleted to a point where loans can no longer be serviced

• Economic conditions and cost of living pressures preclude affordability

• Interest rates keep going up

• The growth in the market has reached its limit

What we do know is that there are always lifestyle, financial and personal reasons to buy and sell, so the real estate market will continue to tick over. The question to answer is whether this decision will be a purely commercial one for you.