The triple anxiety of home sellers

More homeowners tried to sell in this Easter break than ever before. Sellers know the window of opportunity for realising past gains is closing quickly.

Top-end suburbs have already begun to experience house price falls, with Sydney prices down 0.2 per cent in the past month. Picture: iStock

Nobody goes to auction at Easter. Well, normally – it’s one of those periods most home sellers might not even try to test the market.

But last weekend turned out to be different: it was the busiest Easter on record, according to property researchers, CoreLogic.

That is, more homeowners tried to sell their home over the Easter break than ever before. Why? Because the chances of optimising last year’s bumper gain in home price values is suddenly under pressure.

Put simply, conditions are deteriorating in the residential market, creating a triple anxiety among sellers.

First, a fading clearance rate – the key indicator of market tempo is waning. The week before Easter saw the lowest clearance rate so far this year at 64 per cent. More broadly, the national weighted average clearance rate was 79 per cent this time last year, now it’s down to 73 per cent.

On top of this, unsold houses may remain on the market, offering buyers further choice and prompting them to back off from going too high at auctions.

As the buyers back off, the bidding fades just as quickly: The magic number real estate agents like to see is 3.5 – that’s 3.5 bidders per auction. Industry statistics from real estate agents Ray White suggest that number dropped below three last month in Sydney and Melbourne.

As listing volumes remain high, sales volumes are dropping, hard.

Cameron Kusher of the REA Group says that comparing the month of March this year to the same period in 2021, the number of properties sold fell by 7 per cent – and that drop was twice as severe in the nation’s key market, Sydney, where numbers were lower by 14 per cent.

“I expect pretty soon we will see things quieten down a bit as vendors begin to adjust their expectations,” Kusher suggests.

Second, mortgage rates are rising. It barely matters that the RBA board minutes released this week reiterate its call that 0.1 per cent official rates were “appropriate”. But home sellers know rates are going up and many also realise that commercial banks are not waiting around. Fixed rates are already at roughly double the level of just over a year ago.

Following hard on the heels the market leader CBA, both ANZ and Westpac put through a raft of fixed rate increases in the closing hours of business before the Easter break.

Research consultant Canstar points out that Westpac has put through no fewer than six rate increases in one single product this year – the bank’s 3-year fixed rate mortgage has jumped 2.2 per cent – or, if you like, the equivalent of more than eight official 0.25 per cent tweaks. Westpac is offering 3-year fixed rates at 4.49 per cent.

With the majority of borrowers – around 70 per cent – on variable rates, all eyes are now on official rate moves which will be immediately transferred on to variable rates by the banks (bank economists expect the first RBA move in June).

Third, prices are beginning to fall. It is slow and piecemeal to date, but the softening is unmistakeable and again the weakest sections are the two biggest cities where prices are dropping, especially at the top end. Over the year to date combined capital city prices are still up – by 1.6 per cent – but over the last month prices in Sydney fell 0.2 per cent and Melbourne by 0.1 per cent.

But the price drops sellers fear the most invariably arrive with official rate rises: In New Zealand where the central bank has lifted official rates several times since kicking off a hiking cycle in October last year prices are down sharply. In the largest residential market, Auckland, house prices are already down 5 per cent over the last three months.

Originally published as The triple anxiety of home sellers