A unique spring sales season on the horizon

Despite the arrival of spring, sales activity is expected to be somewhat different this year as mortgage rates, weak consumer confidence and stretched household budgets start to take their toll.

Head of research at CoreLogic, Eliza Owen said buyer segments may perform differently than others this year and there will likely be a variety of activity levels in different regions.

An interesting phenomenon in the current environment is that long-term owner-occupiers are more likely to sell, according to Ms. Owen.

“An interesting feature of a declining housing market is the increase in the average holding periods of sold properties,” Ms Owen said.

“Twelve-month holding periods have been elevated amid the current downturn, as well as the 2017-19 downturn.”

“That’s because recent buyers are more at risk of taking a nominal loss if they sell during a downturn.

“Meanwhile, those who have held their property longer are more likely to have made nominal gains, even if the market is going through a short-term cyclical downturn.”

Recent research from CoreLogic suggests that home values ​​have generally increased over time and have increased by more than 380% over the past 30 years.

Meanwhile, national home values ​​have risen just 4.7% over the past 12 months, with annual value changes likely to reach negative territory over the cycle.

According to Ms. Owen, new listings and auctions will increase in the coming weeks.

“Despite the number of new registrations still falling, some data points indicate that an upturn is underway in the coming weeks,” she said.

“For example, ‘CMA activity’, which is a count of market benchmarking reports generated on CoreLogic’s PR data platform, is a leading indicator of ups and downs in listing volumes.

“During the last seven days of August, CMA volumes increased by 8.2%, indicating that the seasonal rise in new listings is about to take off.

“The increase in listings is also expected to trickle down to the auction market, where the number of properties going under the hammer in the combined capitals typically increases from September and continues to rise until early December.”

Ms Owen said she expected the seasonal increase in new listings to vary by region.

“In the five years leading up to the pandemic, new listing campaigns nationwide increased by an average of 19.6% between winter and spring,” she said.

“The seasonal bump varies from city to city, with colder climate zones like Canberra (42.4%), Adelaide (33.7%) and Hobart (31.6%) generally experiencing a greater seasonal effect than more temperate markets.”

Ms Owen said that between 2015 and 2019 the volume of new listings being added to the market has, on average, doubled in Adelaide Hills over this period.

“Many regional lifestyle areas like the Mornington Peninsula, Yass Valley, Surf Coast and Huon Valley are seeing a noticeable increase in new spring listings,” she said.

“Given that home values ​​in Adelaide have only just passed a peak in value, many sellers across the city may be showing an interest in ‘cash in’ this spring selling season.

“Despite a 0.1% decline in the CoreLogic Home Value Index for Adelaide, values ​​are still nearly 45% higher since the onset of Covid in March 2020.”

Ms Owen said transactions will not increase as they did in 2021.

“2021 had a particularly ‘exceptional’ spring selling season, which likely won’t happen again this year,” she said.

“CoreLogic estimates that 154,294 new listings have been added to the market through the spring of 2021, higher than the previous decade’s spring average of 144,985.

“The end of 2021 also saw record auction volumes, with the highest number of auctions ever recorded during the week ending December 12 (4,981).

“More listings were likely concentrated in late 2021 as rising COVID cases and extended lockdowns in parts of the country would have made it difficult to sell from June to early October.

“In other words, sellers were playing ‘catch-up’ as pent-up demand from sellers released once the shutdowns ended.”

Ms Owen said annual capital growth rates averaged 21.3% nationally until the spring of last year, creating a strong incentive for sellers to ‘take advantage’ of soaring prices. price.

“In the spring of 2022, market conditions are very different,” she said.

“Buyers’ appetite is diminishing in the face of rising interest rates, properties are taking longer to sell and sellers are having to offer deeper price discounts to close deals.”

Ms Owen said she expects buyers to be more flexible on pricing than last year.

“While buyers and sellers become more active during the spring selling season, that doesn’t make it a seller’s market,” she said.

“Properties are taking longer to sell, with median days on market up to 33 days in the three months to August, up from a low of 20 days in November last year. .

“Discounts between initial listing prices and contract sale prices (otherwise known as the ‘seller’s discount’) have also become larger, with the median discount standing at 4% nationally.

“Similarly, auction resolution rates across major auction marketplaces are consistently below average.

“Serious sellers will need to be realistic about their price expectations and ensure they have a quality marketing campaign behind the property in what will likely be a more competitive selling environment in the spring and early 2018. ‘summer.”