Current Market Insights
The Current Market Insights Podcast is brought to you by Harris Partners Real Estate.
Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 75: Cautious Buyers and Market Shifts
Hosts Ciaran O'Brien and Peter O'Malley break down the latest trends in the Sydney property market as buyers navigate stricter lending limits and persistently low auction clearance rates. While new listings have surged, genuine buyer interest remains subdued, with many waiting on the RBA’s next move.
We analyze the impact of rising listings outpacing sales, shifting dynamics in the rental market, and an increase in prestige home supply. With financial constraints shaping buyer behavior and growing interest in alternative markets like Melbourne and Brisbane, we explore how vendor motivations and competition levels could evolve in the months ahead.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Speaker 2:Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me is my good friend, mr Peter O'Malley. Peter, hello, kieran O'Brien, great to see you. It's good to see you, peter. It's been a couple of weeks since we chatted.
Speaker 3:Start of the year means that life's gotten away from us a little bit, but thankfully we're back in the studio and we're here to talk Sydney property in particular. Last time we caught up we did talk a little bit about what you had seen getting started for the year and I know we mentioned that you were one of the first agents, and in fact one of the first agencies collectively, to be back on the hustings quite early. But I'm really interested to get a bit of a sense from you now where the market's gone over the sort of four or five weeks since the years kicked back off and, given that we're sort of approaching CPI numbers and an RBA meeting and et cetera, et cetera, what kind of things you're seeing out there with your buyers and your sellers and whether there's, I guess, a bit of chatter and some sentiment around that things are potentially going to change in the near future.
Speaker 1:Yeah, thanks, kieran. Look, there's no doubt that in the last two to three weeks that new listings on market have outpaced sales being made by maybe five or six to one. Okay, so what that has caused or done to the market as such is it's seen a lot of buyers go to the sidelines and say, well, I want to see how some of this stock performs before I jump in. There's no doubt that anyone that was out there pushing real estate in the first three weeks of the year would have been really, really happy with the numbers they were seeing. And I was hearing through industry podcasts et cetera that agents were surprised about the new year vibe in those first three weeks.
Speaker 1:But as you close in on Australia Day in Sydney and Melbourne stock levels jump sharply. Last weekend was probably the first proper weekend for auctions in terms of volumes that one could read anything meaningful into the results. And out of 563 auctions in Sydney last weekend, which ended for the week of the 2nd of February being Sunday, the 2nd of February the auction clearance rate came in at 45.3%. So most agents will tell you that from history, the first couple of weekends, auctions in February are usually pretty strong because there's been some pent up demand over the summer due to a lack of stock. But here we are again and the market has opened 2025 exactly as it finished 2024, with a sub 50% auction clearance rate.
Speaker 3:So a couple of things I want to touch on there. The clearance rate, obviously we've been talking about now for months and months and it really hasn't changed too much. Maybe surprising to some people, maybe not so surprising to others. I'm interested to get your read on not just the sub 50% clearance rate but also the raw auction numbers themselves. I think you said 560 odd. That to me is obviously quite low compared to some of the numbers we've seen over the last 12 months. Do you think that you know? Actually two questions, I guess. Firstly, do you think that that five or six to one increase in listings to sales that we've seen is congruent with just the traditional Australia Day boom, or do you think we're seeing more or less than we might have seen? And the second part of my question given that there's a low clearance rate but also relatively low auction numbers, do you think that in three weeks time or so, four weeks or so after Australia Day, that we're likely to see a big surge in the number of properties actually going to auction?
Speaker 1:I think the RBA decision on February 18 will be a massive determinant and I think we can just about bank a cut on February 18 which will add some support for the market. But on these numbers and this is somewhat hypothetical because I think they will cut on february 18, but on these numbers, if they didn't cut interest rates on february 18, the auction clearance rate will end up in the 30s yeah, wow, that's.
Speaker 3:I mean, that would be unheard of right.
Speaker 1:No, no, no, it's been lower yes it's gone into the 20s.
Speaker 1:Yeah, no, it wouldn't be unheard of. But it does reflect clearly a very depressed auction market, stroke property market. And if we are seeing, after no auctions for six weeks and the first auction weekend of the year with any meaningful volume being 563, which is about 30%, 40%, the norm, if that comes in at 45.3%, when that number turns into 1500, as it will in the weeks ahead, without a rate cut absolutely that would turn into somewhere in the high 30s. And that's not a big shock because late last year on one of the weekends it recorded an auction clearance rate of 41%. But that's all hypothetical. I think they will cut. I think the needle has turned clearly and decisively If you follow the RBA's messaging over the last three years. They said we're data dependent. The data now says it's time to cut and there will be immense political pressure on them to do so and I think they will heed the market's message that the Australian economy needs an interest rate cut on Feb 18.
Speaker 3:So from the numbers over the weekend, do you think that the clearance rate is still low for is it unrealistic price expectations? Do you think that the buyer demand is not there? Do you think people are being a little bit cautious or do you suspect maybe some people are still just holding out to see if the RBA do cut, to give them a little bit more buying power potentially?
Speaker 1:Well, this clearance rate of 45.3, it's kind of like the same clearance rate we were talking about for the last four months of last year, wasn't?
Speaker 3:it, it is, it's almost identical.
Speaker 1:So, despite the talk of a rate cut and the probability of a rate cut on February 18, what the clearance rate here is telling us is it hasn't moved by sentiment, yeah, by sentiment in the face of, yes, we're getting a rate cut in all probability, but even still, they haven't come to the table with any great enthusiasm.
Speaker 1:So we've spoken about what might happen to the market if they don't cut rates, and I think that's the least likely outcome from here. The more likely outcome is what happens to the market when they do cut rates on February 18. And what you're seeing here in this clearance rate is it's going to take some time for a rate cut to have any meaningful positive impact on the property market meaningful positive impact on the property market. Economists will tell you that it takes about six weeks for the impact of a rate cut to sort of. You know people to feel it, if you like, in their, in their hip pocket, and people will be, um, you know, en masse. There's obviously people doing well in this environment, but there'll be a lot of people that will be cautious, um, after the last three years, and they won't be jumping straight back in knowing that interest rates do go up after all. That's what we've all learned in the last three years.
Speaker 3:Traditionally, and as someone who hasn't been in the real estate industry for as many years as yourself, in your experience traditionally, how long does it take for the retail banks to pass on one of these cuts? So if we let's say, you know, for argument's sake, they give us a 0.25% cut on the 18th, how long are we actually likely to wait as consumers? And, you know, is it really going to impact anyone in the short term if they're on the breadline, so to speak?
Speaker 1:Well, let me answer it another way. They pass on a hike immediately.
Speaker 3:Oh, literally within 24 hours I get my mortgage notice saying it's time to go up.
Speaker 1:Uh, they've got form for holding back a rate cut. You know, sometimes two weeks, um, it's usually about two weeks that they hold back a rate cut. Um, we put in our february newsletter that they will be under immense political pressure to pass the rate cut straight through.
Speaker 3:Yep, We've already seen the election cycle started right.
Speaker 1:That's right. I think you'll see, jim Chalmers, if and when there's a rate cut, will be leaning on any of the big four retail banks that don't pass it on to their customers straight away. And you know what? I think the retail banks know how much many households are hanging out for this rate cut, how much many households are hanging out for this rate cut, and I think I'll be surprised if they all hold back 14 days before they pass on the cut, as they've done historically. But hey, they are banks and anything is possible. But I've just got a feeling there'll be immense social and political pressure for the banks to act quickly in terms of passing on this rate cut.
Speaker 3:I also feel like, as a consumer, it's good business to lead the way here. You know, it actually shows a bit of goodwill and you may even earn yourself some new customers or potentially, you know, get some refinances coming your way if you do lead in the right space here as a bank.
Speaker 1:Look when there's a second and or a third rate cut. If one comes in this cycle, I do believe that'll be held back for 14 days.
Speaker 3:Yep.
Speaker 1:But I just think with this first one, the banks may well just say the consumer needs it and wants it, and we don't want to be the ones that are, you know, causing the consumer to consider their options after they've done it so tough for the last three years.
Speaker 3:Yeah, I tend to agree, I think, peter. One of the questions I wanted to ask just goes back to the auctions clearance rate a little bit and I've just been thinking about the idea that you know, we're roughly one third of the auction numbers at the moment and the clearance rate is still sitting at the same spot. You know arbitrarily which says in real terms the actual clearance numbers are much lower Sales volumes.
Speaker 3:The sales volume is so much lower. Do you think is there any potential that the Sydney market has reached something of a saturation point and the sales volumes and the clearance rate are coming down because there really just isn't the transaction demand that there has been in years gone by, that people maybe are just a bit, you know, everyone's I'm not going to say settled, but everyone's relatively stable. You know, we've just kind of entered a phase where people are saying, well, it's not, I don't want to think about engaging in property at the moment.
Speaker 1:Look if I can answer that by jumping to the rental market for a moment, we have not that by jumping to the rental market for a moment, we have not felt the pull on the rental market for the new year anywhere near to the degree that we have in the previous three January Februarys.
Speaker 3:In terms of people coming to inspections.
Speaker 1:That's right, and in terms of overseas students arriving into town, et cetera, yep. So I have a sense that the government and we'll see what the next batch of immigration numbers suggest. But they are peeling back on that, if you like, and with the extra listings that have gone out onto the market relative to the previous three years, the extra listings that have been on market over the last four to five months, I think that's diluting by demand and some markets are handling that better than others. I must say it's really interesting, really interesting, how many prestige homes have been listed for the new year around the inner west. I prestige home is somewhere between five and nine million in the inner west. There is multi-year highs in properties of that ilk coming to market this january, february. Read into that what you will. I don't know what to make of it, other than there are more prestige homes hit the market this january february than I've seen in um in one go for quite some time.
Speaker 3:I'd love to get your thoughts on, I guess, just another element or consideration of this topic. I, in doing some reading, you know, as I do week in, week out, before we come on the show and I try to look at, uh, you know what what's happening across the country and what what's the general sentiment, and one of the things I do is I kind of go through, uh, you know, places like reddit and social media and I'm trying to engage with um. You know, discussion forums that are outside just the mainstream media, and one of the underlying messages I see quite often at the moment is, particularly amongst the younger consumers, there is a great pull towards Victoria off the back of the changes that we've talked about.
Speaker 1:Yeah, it's interesting. I'm not surprised.
Speaker 3:I'm not surprised either, and you know prices have changed as a result of the government's aggressive policy down there. Do you think that the grass is greener? Mentality in terms of places like Victoria, places like Brisbane, is having an impact on Sydney property market at the moment.
Speaker 1:Oh well, not Brisbane, because that's now the second most expensive capital city in the country.
Speaker 1:So that story's closed out and if you're investing in Brisbane at the moment, you're basically trading on a bubble. You're at the end of the boom and you're hoping that it keeps going, and sometimes it does and sometimes it doesn't. Be very careful there. But yeah, I've been watching the Melbourne market closely for the last six months and if you are an essential worker and you have a fixed income a good income, but a fixed income, but a fixed income why wouldn't you move to Melbourne, where the median house price is $950,000 versus $1,450,000 in Sydney, for argument's sake, or $1 million in Brisbane, as we've just discussed? So it's not for me to say that the policy down there is good or bad. They have driven house prices down by driving landlords out of the market, but an adjunctive, that is, they've driven prices down and it's probably attracting, as you say, young people looking to get onto the property ladder. And I'm not looking to invest in residential real estate at the moment, but if I was, I would be buying in Melbourne.
Speaker 3:Yeah, well, you'd have to think that with a likely and or potential government change down there that some of those policies could be reversed and prices may change.
Speaker 1:The existing government probably don't like the policies either, and they'd like to get away from them, and will in due course, and when they do, that market will pop. So yeah, the Melbourne market. It is Australia's second most popular city, if not most populated now, with good demand, and it's got a depressed market, so it's one to have a look at investors for sure.
Speaker 3:So, coming back then, briefly, to something you do know more about and with all of this in mind a lot of theoretical discussions around why things are happening in the market at the moment and why the numbers are low, et cetera, et cetera what's been your experience over the last couple of weeks since we last spoke with the types of buyers that you're meeting? I know that yourself and the agency have done very well to start the year with some great sales, and you've had momentum. What's been the real drivers for yourself and the sales that you've seen around the area? What's the vibe like on the ground with those that are actually buying property at the moment?
Speaker 1:There's people that want to buy, but they're governed by borrowing limits, kieran, yep. So they're saying, hey, I like this property, I'll buy this property. This is what the bank will allow me to pay for this property. Therefore, that's my offer. Can you take it to the vendor? And the vendor says I appreciate the offer, but I want more. So tell them to come up. And it's like, uh-uh, they can't come up.
Speaker 3:Yeah, the banks aren't moving.
Speaker 1:There's no more money, there's a cap. There's no more money, there's a cap. There's a cap on the offer and you take it or you leave it, and some vendors are taking it and some are leaving it, but that's what I've started to pick up in the last four months in the inner west anyway, more so than the time before. That is, buyers are really governed by buying limits.
Speaker 3:Yeah, Okay, and do you think that? Do you get the feeling from the buyers that you are talking to that they are serious? Or do you think there's people you know, lots of tire kickers around that are either not locked in on finance or are quite capped on finance but are just, you know, pie in the sky, optimistic looking around?
Speaker 1:Look, even last Saturday we were seeing pretty healthy inspection numbers. I don't want to call anyone a tyre kicker. If it's a public open for inspection, you're entitled to walk through it, regardless of what your motive is. There's no doubt that some properties do enjoy really good inspection numbers, but the people amongst those high numbers that are serious about securing a piece of real estate for themselves is probably two out of ten, maybe, maybe, maybe three out of ten okay, which is, you know, maybe not surprising, because it ties exactly in with the auction clearance numbers.
Speaker 3:I mean, yeah, or you know virtually the same. So you, you know, what you're seeing does really correlate and reflect what, what is being seen out there in the market and and a lot of those people that I'm not counting in the two or three that are serious.
Speaker 1:I think there's an attitude amongst the buyers I can buy. I'm reading that the market's falling. I'm reading the market's under pressure. I'll move for the right opportunity at the right price. So I think and real estate agents don't like this buyer profile because it's hard to work with, but there's an indifferent or discretionary buyer in the market at the moment and as a real estate agent you need really good skill set to talk that buyer in off the sideline into partaking.
Speaker 3:Yeah, so they're the ones you suggest. They're just kind of sitting around saying well, you know, if it all lines up and I like it, I'll go for it.
Speaker 1:But I don't need to. And one of my colleagues is dealing with a buyer and he's only met this buyer through selling the property that we're selling. And the buyer is reticent to make an offer because all that happened to him last year is he'd see a property advertised for one three. He'd try and buy it pre-auction. No, the vendor wants this one to go to auction, sir, and then it would sell at auction for $1.7. So that's one of those buyers that we're trying to talk in off the sideline to say, well, if you make your offer, we'll negotiate a fair price in good faith with you. And it's like, pal, I've heard it all before and I've ended up on the wrong side of the stick. So I don't know if I want to partake again. I might just, you know, just watch the market for a few more weeks. That's the sort of attitude that's out there. So real estate agents have brought that on themselves by continually lying to buyers about what they can buy a property for and then, you know, smacking them with reality on auction day.
Speaker 3:Yeah it's certainly unfortunate that you know the vocal minority have sullied the industry for so many. As we wrap up the episode, then, peter, one of the well, I guess the final question I've got for you we often talk about in our market wraps what the buy sentiment is at the time. You know, this week, this month, this fortnight, whatever. What are the buyers doing and what are they saying? Given the fortnight, whatever, what are the buyers doing? What are they saying, given the, the market conditions we're in at the moment? For your vendors that are on market at the moment, and the ones that you're talking with, what do you think is the? The major motivator for people that you're dealing with at the moment? Are we, you know? Are you seeing a sense of, uh, people who are under some financial distress, or are you really just dealing with people that are making, you know, choices about just where they want to be in their life and and now's the time for them?
Speaker 1:I think overwhelmingly. The major vendor profile that we're seeing in the market, not just with our agency but across the board, is still investment properties being sold off and a lot of downsizers, baby boomers selling long-held investment properties at the moment as part of their retirement strategy. The property's positively geared, they're about to retire or have retired, so the taxation benefits are somewhat diminished. As I say, I do note. I do note that there's a abnormally high number of prestige five million dollar plus listings that have come to the market this January, february and, if I can speculate on what I think is happening there, there was a run of very good sales in that price category in the middle of last year and it's tempted a wave of sellers into the market and at that sort of price bracket and it remains to be seen whether there's buy demand to continue absorbing the increased stock levels at the prestige levels.
Speaker 1:Because what happens at the prestige market? You can really overpay really easily and that is you fall in love with a property. There isn't anything else that's been on the market like it for six months. You think there may not be anything else on the market. Like it for six months, you think there may not be anything else on the market like it for the next six months. You really want this particular one, you can afford to pay the premium to get it. You buy the premium and then six, seven months later there's a wave of similar listings that come to market and end up selling for 15 20 percent below what you've paid.
Speaker 1:And it's at that point you've realised that you've gone too hard and too heavy. But the reason you did is you're in a competitive situation with only one listing on the market and the price swings in a falling market and the haircuts that people receive is actually much higher historically in the higher price points than it is in the lower price points. Because when the tide goes out in the prestige market, a surge of listings can come on and the buyers say, hey, well, you know I've got a range of choices here. I'm going to be an opportunist, so I'm not saying that's going to happen to the prestige market to begin this year. But I will say that I don't believe the buyer demand will be there to absorb all of these prestige listings that have come to market and already there's too much stock on the market for the new year that is not selling for me to think that there's any chance of a strong or a robust market around the corner.
Speaker 3:Yeah, really good insights, Peter, and I think certainly the future is going to be very interesting in a week or two's time when the RBA do make their decision and the impact that may have on the listings on the market. I know that you've seen some interesting things on the hustings and I certainly know that our listeners love to hear about what is actually happening and what is likely to happen. So thanks so much for coming in and we look forward to chatting with you next week. Good on you, Kieran.
Speaker 1:Thanks very much.
Speaker 3:And thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
