Rising rates and low consumer sentiment will likely keep demand subdued despite an uptick in listings
The spring selling season is unlikely to see an uptick in residential sales this year despite a significant rise in listings, experts say.
While the spring selling season usually delivers a bounce, continuing interest rate hikes and low consumer confidence will likely keep demand subdued, according to The Australian Financial Review.
House price drops are also predicted to accelerate and become more broad-based as the housing downturn hits smaller capital cities.
Tim Lawless, research director at CoreLogic, told AFR that lower house prices had so far not spurred a noticeable uptick in demand, with buyers worried about the impact of higher interest rates.
“We haven’t seen any evidence of a pick-up in buyer demand, at least based on estimates of sales activity to the end of July,” Lawless said. “Our expectation is that sales activity will reduce further through the spring due to further rate rises.”
In the three months to July, nationwide home sales fell by 16% compared to the same period in 2021, driven by a 40% fall in Sydney and a 26% decline in Melbourne.
“Sales volumes are falling quite sharply, particularly in Sydney, so I have no reason to suspect that would have turned around,” Lawless told AFR. “It has probably gotten worse considering the higher interest rate environment and low consumer sentiment. As rates rise, I don’t expect to see any improvement in consumer sentiment, which is a big part of transactional activity in the housing market. When consumer sentiment remains as low as this, we wouldn’t expect a turnaround in activity.”
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According to CoreLogic, home sales have typically fallen by 25% during previous downturns. So far, annual sales volumes nationwide have fallen 5.9% from their peak in December 2021.
Lawless said home sellers were looking at a tough season, with more listings coming into the market as demand falls.
New stock rose 11.4% nationwide in July compared to a year ago, and is currently 6.3% above the previous five-year average, AFR reported. Over the four weeks ended Aug. 21, new listings in Melbourne rose 23%, new listings in Sydney climbed 19%, and new listings in Canberra were up 22%.
“Spring could see additional downwards pressure on housing prices as advertised stock levels rise amidst the normal seasonal rise in fresh listings at a time when housing demand is lower due to higher interest rates and low sentiment,” Lawless said. “Vendors will probably become more flexible in their pricing expectations and more willing to negotiate.”
