Real estate Sydney: ‘Flashy’ first-homebuyer boom causing election headache, huge home price falls won’t be the norm in 2023

First-homebuyers are flooding the housing market early in 2023, and the tactics they are relying on is set to become a major issue ahead of the NSW election.

First home buyers are flooding the market early in 2023. Julian Andrews.

OPINION

The first auction weekend where first home buyers could buy and skip paying stamp duty saw a dramatic take up.

It was highlighted when 10 of the 11 registered bidders seeking a two- bedroom, one-bathroom Bondi offering were first timers.

It was not so much the $1.41 million sale price but the depth of FHBs that stunned market observers.

Its selling agent Paula Simoes from The Agency had issued initial $1.25 million guidance, which she upped to $1.3 million, then $1.4 million during the shortened marketing campaign.

It was sold to a FHB expatriate living in London who is coming home. The buyer will pay $2528 annual land tax, with annual increases capped at 4 per cent.

First home buyers were super keen on this 2-bed Bondi unit. Picture: realestate.com.au

The stamp duty revenue would have been $61,750, so the choice is a no-brainer, if one puts the vicissitudes of price direction aside.

Only three of the bidders got to place a bid given the pace of bidding at the onsite auction.

“There’s exciting new energy in the marketplace,” Simoes said.

The energy could be contagious, but with limitations. For starters the NSW First Home Buyer Choice scheme only enables purchases up to $1.5 million.

But given the old upper limit for FHB concessions was $800,000 there’s going to be a keenness in that previously unsupported price bracket.

Supply will be a key factor.

When Simoes launched the Bondi Rd apartment pre-Christmas it was the only two-bedroom strata apartment on the market. There are now four on realestate.com.au.

The residential sales market doesn’t typically return until after the Australia Day break, so the January results won’t necessarily be a representative pointer for coming months.

However overall early bird February auction listings are down 27 per cent across Sydney, according to PropTrack, which will assist in price preservation, and even potentially in price growth.

NSW Government’s First Home Buyer Choice scheme could develop a reputation as being a scheme for the flashiest of first home buyers. Picture: Julian Andrews.

The NSW Government’s First Home Buyer Choice scheme only allows owner occupiers, so any enthusiastic spike in their acquisitions could prompt a pause in investor activity, notwithstanding their elevated interest given rising rentals.

More than 515 first home buyers skipped stamp duty in the scheme’s first week, including last weekend’s acquisitions. The strongest demand came around Blacktown, followed by the Bayside LGA, then around Parramatta.

Statistics from the office of the NSW Treasurer Matt Kean noted a third were in the $1m to $1.5m range.

If that percentage goes too much higher, the scheme could develop a reputation as being a scheme for the flashiest of first home buyers, which could work against the scheme’s acceptance by the electorate.

Of course the elephant in the room is that Labor says it will scrap the land tax scheme if elected in March.

The policy divide will escalate FHB purchasing between now and March 25 election.

HUGE SYDNEY HOME PRICE FALLS WON’T BE THE NORM IN 2023

The best early indicator on how the 2023 real estate market will unfold is going to come from watching the level of new listings for sale – and then checking on the February auction clearance rates and the asking price discounting for private treaty offerings.

There’s no sign yet of any spike in Sydney listings, which would spell trouble given buyer demand is understandably cautious.

Even without a spike, Sydney prices are likely to ease further.

Despite nine months of home price falls, values remain well above pre-pandemic levels.

But we kick off the year with very few owners in negative territory compared to their purchase price given the extent of the pandemic price boom. And there are very few owners who are in negative equity when it comes to their home loan indebtedness given conservative loan to value ratios. It was reduced stock levels during 2022 that meant price declines were curtailed.

After nine consecutive months of price declines, the national median is 4.25 per cent below its peak, according to the PropTrack Home Price Index, and 29 per cent above pre-pandemic levels.

Updated economist forecasts for the total 2022-2023 decline typically still sit between a cumulative 15 per cent to 25 per cent decline.

The forecasts suggest there are price tremors ahead for markets and individual sellers along with opportune prices for buyers.

The biggest one-off decline spotted last year was 19.5 per cent which came in December in Surry Hills.

The $990,000 sale came two years after the early 2020 pre-pandemic sale of the two bedroom terrace at $1.23 million. The intervening period apparently saw the terrace go into structural decline with major roof leaks, and also the arrival of termites at 11 Little Bloomfield St.

The median Surry Hills terrace sits at $2 million, which was down by a less alarming 4 per cent over the year, according to realestate.com.au.

This Kangaroo Valley weekender copped an almighty loss, however there were exceptional circumstances.

The two other big price declines of last year included a Kangaroo Valley weekender which resulted in the year’s highest known NSW property dollar loss.

With only one bid at its auction in December, the 48ha luxury escape fetched $6.25 million, which was $1.45 million – and 18 per cent – down on its late 2021 $7.7 million price.

The resale came after the business of the owner had collapsed.

There was also an 18 per cent decline when an Edgecliff buyer of an off the plan one-bedroom apartment accepted a $207,000 loss, having bought for $1,125,000 in 2019. The vendor accepted $918,000 after 202 days on market.

The three sales are exceptions rather than norm, and there were obvious specific prompts behind all three outcomes.

Meanwhile for the mainstream market, speculation and reaction surrounding inflation and interest rate direction will be the key macro factors for prices this year.

While these factors are beyond the control of households, reviewing personal financial circumstances now could prove prescient ahead of any headwinds.