New property listings fell nation wide in January 2023 by approx. 20% when compared to the same time in January 2022. This level of decline in listing numbers has left many buyers with a distinct lack of choice in some postcodes.

Now granted that the January holiday period is historically a quiet time for listings it isn’t much of a surprise that listing activity falls over this month. Our focus should rather be directed to new listing stock which indicates a 13.8% fall in new listing activity in Sydney when compared to the same time last year. It appears many property owners are choosing to bide their time. Additionally, those owners looking to pull the trigger and go to market are finding that as a result of these diminished new stock levels that buyer enquiry remains higher than expected.  

Another development which many prospective buyers have had their eye on are the changes to the Stamp Duty which was introduced by the NSW State Government and which became effective from 15th January this year. Under the new tax legislation currently being trialled, first home buyers in NSW who are seeking to spend under $1.5 million for their first home can now opt to pay an annual property Land Tax in lieu of the upfront cost of stamp duty. For those buyers who are purchasing land as opposed to an established home, their purchase will be capped to $800,000. The annual property tax payments are based on the land value of the purchased property. The property tax rates for 2022 – 2023 and additionally 2023-2024 will be $400, plus an additional cost of 0.3 per cent of land value.

With the RBA choosing to raise the interest rates again at its board meeting on Tuesday, the cash rate currently sits at 3.35%. There’s been a lot of conversation in the media about how home owners are handling the mortgage stress which accompanies a rising interest rate cycle.

Considering that most lenders were actually showing mortgage arrears to be around record lows last year, its likely some evidence of rising mortgage stress will start to emerge in 2023 under such substantially higher interest rate settings, with the potential for a more noticeable lift as further fixed rate borrowers migrate over to variable mortgage rates, according to Tim Lawless from CoreLogic.

However, any material rise in mortgage arrears is unlikely unless labour markets loosen substantially. Forecasts from the RBA and Treasury, as well as the private sector, have the unemployment rate holding below 5% over the forecast period and well below the decade average of 5.5%.  

Moving forward, it appears that there will be a flight to quality from buyers and the various sectors of the Sydney real estate market will be segmented, which is a more “normal” property market, according to Economist Dr Andrew Wilson. There is a clear flight to quality with A-grade homes and investment-grade properties still in short supply for the prevailing strong demand, but B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties.

Essentially one of the key points to take away from this is to put the current market cycle into context. Not the first time I’ve said this but that’s because it continues to bear relevance. The Sydney market has been the standout capital city in the country in terms of growth performance and while prices have since cooled from their peak, prices are still well in front of where they were pre-Covid. Sydney’s property market still continues to fetch impressive prices, particularly for sought after homes in sought after locations.

Click here to see the graph

The First Home Buyer Choice is a key component of the Government’s $2.8 billion Housing Package announced in the 2022-23 NSW State Budget. For more information visit the NSW Government website here

If you’re interested in a more comprehensive analysis on what’s happening then check out the Housing Market Update for February here

* This information is general in nature and not intended to be financial advice.  

* Reach out to myself or my team at Meridien Realty for the best real estate assistance and expert advice on what’s happening in your local market. Whether you’re looking for a top selling agent or professional property managers to rent your property you can rest assured we’ve got you covered with the best advice.