Why Sydney has become obsessed about real estate – again

Sydney’s housing market has become snared in an unprecedented home buying frenzy due to a widespread fear that’s driving home seekers to extreme lengths to get their slice of the Aussie dream.

Northern beaches resident James Carroll was having a quiet Tuesday night dinner with partner Nicole when he got a phone call he would never forget.

It was his estate agent with news of an offer on their Freshwater home – shock news considering they only had their first open home that afternoon.

The conversation was followed by another call and another offer. Then the ringing became constant. Every call was a new offer from a frustrated buyer desperate for a slice of the Aussie dream.

By the next day the couple had received 17 offers for their two-bedroom unit, many well above the price guide.

With so many offers, the couple called off all further inspections, pulled the plug on their auction, and accepted a price well above what they ever imagined.

But it was what they did next late last year that gave another startling clue into why Sydney’s housing market is booming.

“We wanted to move to a bigger house but we’d missed out on a few sales, so when we saw something we liked we knew we had to be quick or it would be gone,” Mr Carroll says.

James Carroll, with partner Nicole Parry and daughter Maya, found the housing market extremely competitive. Picture: Julian Andrews

“With our Freshwater unit sold for a good price, I just said to the agent for this house ‘what do I need to do to beat the other offers?’

“So we did that and got the house. That’s the only way to do it. It’s cutthroat out there. If you think too much, you’ll miss out.”

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Data from Realestate.com.au confirms Sydney, and Australia at large, is in the grip of an unprecedented home buying frenzy, with upsizers leading the charge.

The listings group reported there were 53 per cent more “serious intent” buyers in the national market over January than over the same period in 2020, before the pandemic hit.

In NSW, buyer demand quadrupled in the most popular markets and queues of home seekers have been snaking down the street at open for inspections.

Buyers have been vacuuming up almost anything that comes on the market – last week every inner west auction produced a sale, while in the Central Coast and Northern Beaches it was 95 per cent.

The Sydney-wide auction clearance rate was 85 per cent, well above the long-term trend of about 65 per cent, according to CoreLogic.

Lines of home seekers have been snaking down the street at open for inspections.

Property pundits have declared these developments represent “unprecedented buyer demand” and some are now forecasting prices to rise by double-digit margins this year.

It’s a surge being fuelled by record low interest rates, a rebounding economy and improved confidence from the country’s success in containing the spread of COVID-19.

Demand is also being propped up by unusually generous government support for first-time buyers, including stamp duty discounts and multiple cashbacks and grants for buyers of newly built properties.

But equally it’s a market governed by fear.

“Homebuyers know it’s a strong market and they are scared prices will go up so quickly they will miss out,” Mortgage Choice broker James Algar says.

“It’s made them desperate. There’s a real urge to buy right now, especially because loans are so cheap.”

Realestate.com.au chief economist Nerida Conisbee says a shortage of available properties has stoked buyers’ fears and created a sense of “urgency”.

“There has been a huge increase in buyers but not listings. Buyers have a reason to be fearful,” she says.

Auctions have been attracting huge crowds of bidders. Picture: David Swift

COVID lockdowns had the added effect of making families “reconsider their lifestyle” and the result was that more people were seeking bigger homes – mainly houses with backyards, according to Ms Conisbee.

“There’s been a structural shift in the market because of COVID and more people working from home. It’s encouraging buyers in a way that’s never happened before.”

Agents report frustrated buyers are often resorting to vicious tactics, especially in the pressure cooker northern beaches market.

Stone Real Estate agent Eddy Piddington says some beaches buyers aren’t even touring properties and simply make offers as soon as listings go online.

“We never had that before, not in the 17 years I’ve been in real estate,” he says.

“People do this when they’ve missed out on multiple properties and the frustration builds up.”

Close to 60 per cent of the buyers Mr Piddington is meeting claim to have missed out on prior sales, he says. “They say to us, ‘what do I have to do to get this?’ No one wants to keep missing out.”

Many Vale resident Damien Sheehy is selling his unit at 8 Koorala St, one of the few in the area with three-bedrooms, but says hunting for a new, bigger home has been “terrifying”.

Damien Sheehy, with wife Katherine and daughter Frankie, are selling their unit at Koorala St in Manly Vale. Picture: Julian Andrews

“One place we went to, there were 70 people queuing up to go in. We didn’t even get a chance to see it at the inspection and then it sold soon after.

“Nothing sells for the guide. One place we saw at $2.1 million sold for $2.8 million. Then there was another place that had a $2.7 million guide but it sold for $3.5 million.”

Even buyer’s agents are struggling with the pace of sales. Normally the go-to service for purchasers who want homes in a hurry, many agencies are reporting being strongarmed at open homes.

“A lot of buyers are reckless,” Real Estate Buyers Agents Association president Cate Bakos says.

“We’re coming against people who won’t order building inspections, they just throw out offers at the opens.

“Not even we can move that fast. We have solicitors we can call up at 12am to sign contracts if we need them to, but there’s not much we can do when other buyers lose common sense.

“It’s like if you’re not in the front third of the queue at the open for inspection you can miss out.”

Being at the back of the queue at an open for inspection can mean missing out on the property. Picture: McGrath-South Hurstville

Ms Bakos says the market is more competitive than at any period she has seen in 15 years.

This includes the period around the global financial crisis in 2009 when the Rudd government introduced a generous First Home Owners Grant scheme that drove up buyer demand.

“We’re in a similar situation now, except the market it’s even hotter than it was then,” Ms Bakos says.

“All the new government incentives we’ve got, the stamp duty discounts, they’re just adding further fuel to the fire. It’s not necessary.”

Ms Conisbee says competition could actually intensify even further if home seekers come up against an additional buyer type this year – investors.

“They’ve been the missing puzzle piece in the market and sat out sales last year, but rising prices and low rates will encourage them to come back in,” Ms Conisbee says.

Among the investors planning big moves is Western Sydney native Eddie Dilleen who already has 29 properties at age 29. Eight of his homes were bought last year.

He is planning even more purchases in 2021 and says rising prices are an opportunity to make money.

“People who understand the market knew home prices were never going to go down by 30 or 40 per cent like some people said last year,” Mr Dilleen says. “There’s just too much demand.”

Auction clearance rates were 95 per cent in some Sydney regions last week. Picture: Gaye Gerard

Other investors planning more purchases include Nathan Birch who already owns more than 200 properties and has an almost cult-like following of investors trying to replicate his success.

Mr Birch says he will buy more houses this year because of the prospect of getting quick equity from further price rises.

Real estate veteran and McGrath Estate Agents founder John McGrath agrees there will be more investors coming into the market but says home seekers should keep some perspective.

“I tell people try not to panic,” he says. “There will be more competition and it will be a strong market but be flexible. If you can’t afford your preferred suburb you can try somewhere else.”

Originally published as Why Sydney has become obsessed about real estate – again