After 2 years of soaring prices, the Sydney property boom is officially over, with a significant shift in market conditions over the past several weeks.
Clearance rates now consistently sit in the 60% range, and some weeks even in the high 50s, as opposed to the giddy heights of a year ago when almost every property sold prior to or at auction. Vendors are now far more likely to take offers that are near enough to their desired price in order to be assured of a sale. And vendors with a strong desire to sell are reducing their price to meet the market.
The first Tuesday of May saw the Reserve Bank pull the trigger and increase the official cash rate for the first time in almost 12 years. The increase of 25 basis points to 0.35% was immediately passed on by the big 4 banks, with prospective buyers who are taking on a large mortgage now being far more conservative when making offers. FOMO has been replaced by FOOP - the fear of over-paying. That said, the anticipation of the rate rise was actually felt in the market 2 months ago with lower numbers at open home and few bidders at auction, and therefore has already been priced in.
However the RBA also made it very clear that this is the first of multiple future rate rises to tackle inflation so expect to see further softening in Spring when there is typically a large influx of stock on the market.
Amidst an ongoing pandemic, the war in Europe, rising costs of living and sluggish wage growth, it pays to remember that there is some positive news: the economy is booming and business is good. There is no significant downturn on the horizon, just a readjustment and a more balanced market that was well overdue.