Real estate Sydney: Property guru John McGrath says Harbour City property market is on the up

Real estate guru John McGrath believes a spike in buyers will drive a Sydney property recovery, after data revealed a second straight month of price growth.

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Real estate guru John McGrath says he expects an increase in buyer activity to drive Sydney’s property market recovery, on the back of new data revealing two consecutive months of value growth.

The McGrath Estate Agents founder said buyers have come into 2023 with a more positive mindset than late last year and are competing for a limited supply of property.

“Since Christmas we’ve seen a significant increase in buyer activity in Sydney with online enquiry and open house numbers both spiking since January,” McGrath said.

“There’s little doubt there in my mind there are two drivers of this. Firstly listing levels are low, so demand is outweighing supply.

“However the most telling factor is that buyers have sensed that we are at the bottom of the market cycle and they’re keen to get in during 2023 before we see rises in 2024.”

McGrath said buyers see value, even with further rate rises predicted.

John McGrath (left) calls an auction in Sydney in October, 2022. Picture: David Swift

“Buyers have factored in at least two more rate rises to their calculations, which I think is sensible, but they’re buying in most parts of Sydney at a 15 per cent discount to 18 months ago, so in the main they even each other out,” he said.

“Plus rents have seen a 20 per cent increase in most areas so first home buyers are trying to get off the rental market and into home ownership if they can.”

The main hurdle that the market faces looking forward is the famed ‘fixed rate cliff’, he said.

“The greatest challenge will be fixed home loans coming off all-time lows and having to refinance at current rates after nine consecutive rises.

“There’s no doubt this will provide pain to a large number of borrowers and also increase listing activity.

“And with a forecast migration boom of around 300,000 into the country over the next 12 months it should be more than enough to keep prices at current levels and indeed start upward pressure on values again within 18 months.”

Sydney has enjoyed a second successive month of home price growth, after nine successive monthly falls last year. Pictures: Darren Leigh Roberts

McGrath’s comments come after PropTrack’s February Home Price Index revealed Sydney home prices increased 0.36 per cent month on month.

This followed on from a 0.26 per cent lift in January.

And while these were relatively minor gains, they came after nine straight months of declines from April to December last year.

PropTrack senior economist Eleanor Creagh said the numbers were trending the right way for a gradual recovery.

“The pace of home price falls have certainly eased in recent months, and the housing market downturn has lost momentum,” Ms Creagh said.

“The pace of price falls over the previous few months was a lot less than the much larger falls we saw in June and July last year when interest rates first started rising.”

PropTrack figures show prices began to fall in the first half of last year, with a 0.29 per cent slide in May, followed by 0.40 per cent, and 0.70 per cent in June and July. August saw values fall 0.49 per cent, before falls averaged less than 0.20 per cent between September and December.

Ms Creagh noted that the scarcity of homes on the market was likely underpinning the value gains of January and February.

“While we’ve seen that home buying demand has fallen, with that fast pace of rate rises, with weaker consumer confidence and expectations of price falls, that lesser demand is being balanced at the moment by the fact there’s fewer properties listed for sale,” she said.

Tom Panos has seen positive signs the market thus far in 2023. Picture: John Appleyard

“The total number of properties listed for sale in Sydney is down close to 20 per cent on previous five-year averages, meaning potential buyer interest is being concentrated.”

Despite being February’s second best performing capital city after Adelaide (0.44 per cent), Sydney values have suffered the largest fall over the past 12 months, down 6.64 per cent. However, home values, now at a median value of $983,000, still sit 22 per cent higher than where they were pre-pandemic, meaning values losses for homeowners who purchased before early 2020 lockdowns will be well covered by the previous gains.

Auctioneer and real estate coach Tom Panos is on the ground calling bids every Saturday and said he noticed the atmosphere of the market changing direction late in 2022.

“I think it has bottomed out,” Mr Panos said.

“Last year, properties had been dropping and dropping and then around November and December, they stopped dropping.”

Mr Panos said the new year had brought with it a new buzz at Saturday auctions.

Eleanor Creagh – PropTrack senior economist – says the market downturn has lost momentum.

“There have been a lot more buyers out there,” he said.

“And I have noticed some properties beginning to sell for more than what I thought they would.

“There were buyers who were waiting and watching to see what would happen to try and time the market and, from the conversations I’m having now, they’re saying they are prepared to buy now.

“They are saying that even with three more rate rises factored in, they would rather buy when the market is dropping than risk trying to buy when it starts going up.”

Mr Panos said there are still areas of the market that will continue to decline.

“When we say the market has bottomed, we can’t talk about all property types,” he said. “Wherever there is an oversupply of units, for example, prices are still dropping. And when auction and sales volumes are lower, results do get skewed.

“But overall, I can say the market is definitely better this year than it was late last year and the vibe is different. There are buyers everywhere.”