House prices: Sydney has the biggest drop, when to buy or sell

In recent months, the news for the Australian property market as a whole has gone from bad to worse, with falling prices in Sydney, Melbourne, Brisbane, Adelaide and Perth.

The rate of fall in prices also accelerated, with prices falling 1.6% in August.

But not all real estate markets in the country are affected in the same way.

In Sydney, prices fell 9.1% from their highs recorded in February, while in Adelaide and Perth prices fell only 0.6% and 0.7% respectively.

If analysts are right, this is just the start of the home price slump, with economists and mainstream commentators predicting a 10% to 25% drop, and some analysts adding qualifiers depending on which if rates stay higher for longer, prices could fall significantly more.

But the journey to where prices eventually bottom will not be a straight line. Even in the biggest real estate crashes of the modern era, there have always been times when the market was stronger than others.

For example, during the US real estate crash that accompanied the global financial crisis, the median Las Vegas home lost more than 60% of its value. But due to seasonality, there have been times when price declines have moderated, dropping from a rate of over 5% per month at one point to just 1.4%.

But as the market’s summer surge subsided, the fall in prices accelerated once again, with the market finally bottoming nearly four years later.

How are the different Australian markets faring so far?

From the spring selling season after winter to the real estate boom after Australia Day, the country’s various real estate markets all have their own unique seasonality based on local factors.

For example, in the country’s largest property market, Sydney, the strongest month for price growth is March. In contrast, the lowest is in July, at the height of winter.

With Sydney currently in the middle of its strongest three-month block of the year, which runs from September to the end of November, we could see somewhat moderate price declines depending on the seasonal factors that tend to boost the market during this period.

On the other side of the nation to the west, Perth has a completely different seasonal cycle. Perth’s strongest months are February and March.

Meanwhile, in the Sunshine State, the strongest months in the Brisbane market are October, November and December, with August being the worst performing month.

In Adelaide, the strongest months are May, November and December, with August being the worst performing month.

Finally in Melbourne, the strongest seasonality for the market is in March, October and November, with the winter cold in July resulting in the weakest period for the market.

Drop-down lists

New property listing campaigns fell for three straight weeks through September 20. This is quite different from the normal seasonal pattern, where new listing volumes are expected to rise steadily.

“I think this could temporarily slow the pace of the downturn as sellers seem to be holding back a bit at the moment, which may not match the seasonal increase in buyer interest,” said Eliza Owen, head of research at CoreLogic.

After experiencing strong growth in all major markets across the country throughout 2021, the divergence we have seen in recent months is likely to continue.

“There are also real estate markets, generally more affordable markets, which tend to lag behind. So in cities like Adelaide, Perth and Darwin, where we only see prices falling (or in the case of Darwin prices continuing to rise), we would expect this to be partly a function of a lag, and that these markets will soon see a steeper price fall trajectory,” Ms. Owen said.

Perspectives

Between the impact of seasonality and owners increasingly reassessing whether or not to put their homes up for sale, we could see the pace of price declines moderate in some markets.

Longer term, anyone can guess. Many forecasters have been wrong about the Australian property market over the past five years, some up and some down.

With so much in the world in flux, from the explosive sabotage of Russia’s Nord Stream gas pipeline to UK pension funds on the brink of insolvency, it’s impossible to know how it will all play out.

While there are certainly more than enough local factors to determine the direction of the market, these external factors could ultimately help decide the fate of Australian interest rates and our country’s housing market.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator

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