Cautious buyers

Minor falls in home values this month for the first time in 20 months, with the ABC reporting that Sydney’s values dropped a mild 1%, and the national average dropping and even milder 0.1%.

Various articles discussed some of the ways this change is happening, including hints that perhaps the market is returning to a buyers’ market to some extent. All Homes reports that attitudes in Canberra are less of FOMO, and increasingly of fear of paying too much (‘FOPTM’?). In other words, emotional buys seem to be reducing, and common sense to some extent rising.

Domain discusses how falling clearance rates are pointing to further falls in property prices particularly in Syd and Melbourne. The article notes that clearance rates are at their lowest point in 12 months. There has been an increase in listings, presenting more choice for buyers, on top of the higher interest rates and falling demand.

Spare a thought for renters who are currently between a rock and a hard place. Real Estate.com.au posits that renters are currently facing the dilemma or purchasing in a falling market, or risk increased rents due to the shrinking rental options available.

In a sign of the times, Domain reports that 2 units in the same block in Marrickville sold a half a million dollars difference at auction, within an hour of each other. The more pricey of the two had one more bedroom and a ‘better view’. Half a million for 1 more bedroom seems to confirm previously reported Core Logic data that shows smaller homes and units (2 bedroom or less) are less likely to hold their value than 3 or more bedroom ones.

Stamp duty changes

Although a highly anticipated reform, the State Government changes to begin moving away from stamp duty towards a land tax seem to be getting a more luke-warm welcome than anticipated, with Domain citing the changes as ‘reform-ish’. However, the same article notes that this initial version is a stepping stone that initially would help ease first home buyers into the market.

The NSW Treasurer Matt Kean is quoted by the ABC as saying, “This is the first step in making sure that we start testing the waters for tax reform in New South Wales.”

Starting in 2023, first home buyers with purchases up to $1.5m will be able to opt-in to a land tax $400 per year plus 0.3% of the land value.

In the ABC article, Property Council NSW director, Luke Achterstraat has nothing good to say about the old stamp duty system and describes it as a “triple threat”. He says, “Stamp duty is volatile, it’s inefficient, it actually traps people in their homes.”

Interest rate rises

Core Logic describes the recent interest rate rises as a ‘double whammy’ for households, due to recently flattening values coupled with rising inflation. This effect is expanded on by Domain, who claim that more than a quarter of mortgagees will suffer financial stress, which they define as having to pay more than 30% of their net income to make payments.

The ABC produced an interesting infographic to show what areas of Sydney might be experiencing more and less mortgage stress. Campbelltown and the south western Sydney areas appears to be some of the biggest problem areas, possibly partly due to the large number of new builds.

Although interest rate rises are expected to further dampen property market values, sky rocketing construction costs also have a potential knock-on effect of slowing new housing approvals since their height in March 2021, according to an article in RealEstate.com.au. This impact of this further complicates the property value outlook in the immediate future.

In context, and despite all this, RealEstate.com.au also notes the worth of the Australian property market still breached 10 billion for the first time in March. So for first home buyers especially, who are mortgaged up to the hilt, the flattening values have never been a bigger issue than now.