Easing of house prices in Sydney and NSW comes with new worries for homebuyers in 2022

The sudden decline of FOMO and easing of prices is great news for home buyers, but the market shift will come with fresh concerns in 2022.

The sudden decline of FOMO and the easing of prices is great news for home buyers, especially first home buyers, at the end of a year that has experienced an unprecedented real estate boom.

A fall in home prices in 2022 is becoming more likely. But with that comes another vexing matter for home seekers.

The average price of a Sydney home has rocketed up a wallet-sapping 26 per cent in 2021, according to CoreLogic’s annual Best of the Best report, compared to just 4 per cent last year.

That boom appears to have peaked at the end of September with home prices expected to provide buyers with further relief into the new year and beyond.

A fall in home prices in 2022 is becoming more likely. But with that comes another vexing matter for home seekers. Picture: NCA NewsWire / Gaye Gerard

Listings are up and clearance rates are falling. That market shift is set to provide a more buyer friendly environment, as opposed to the strong seller’s market that has dominated much of this year, with listings finally back to pre-Covid levels.

“Due to an influx of listings, levels have returned to normal and that is good news for homebuyers,” Eliza Owen, CoreLogic Head of Australian Research said.

“Buyers now have more choice and with that comes the potential for more bargaining power. However it will take some time for vendors to shift their price expectations [lower] and we are already seeing that mismatch [between buyers’ and sellers’ expectations] in clearance rates tending down.”

Ms Owen said affordability constraints – buyers refusing to continue to pay top prices – has also led to a loss of market momentum in NSW metro and regional markets at the back end of 2021.

“Prices are so high, that people are opting not to buy and that is where we are seeing falling demand,” she said,

“The momentous upswing [in prices] will likely see a downswing period. Growth rates are slowing and slowing growth rates can often precede a fall in prices.”

Buyer fatigue has become a factor in the market. Picture: NCA NewsWire / Gaye Gerard

However that potential market change comes with fresh new considerations for buyers.

“That fall in property prices might coincide with an increase in interest rates,” Ms Owen said.

“So, even if prices do come down, and you might have spent that time saving up a deposit, ultimately it might not be worth your while waiting and trying to time the market if you are looking to buy long term because you won’t necessarily end up better off.

“Just find something you like and can afford if you are going to be there for a long time.”

Lifestyle considerations are also likely to change for homebuyers post-pandemic with the opening up of interstate and international travel. Savings that might have been invested in a new house or renovation over the past two years might now be spent elsewhere.

Kurnell in Sydney’s south has led the way in terms of house price growth in the greater Sydney region over the last 12 months with a 55 per cent increase. In units, Point Piper enjoyed the greatest Sydney growth of 38 per cent.

Unit prices in Yamba have grown 57 per cent in 2021.

Gerrigong on the south coast enjoyed the greatest house price growth in regional NSW of 56 per cent. Yamba on the north coast was top with unit price growth, with a 57 per cent rise.

Fear of missing out (or FOMO) is drying up and buyer’s agent John Anderson said “buyer fatigue” had also become a significant issue at the end of 2021. But he expects homeseekers to come back refreshed after the Christmas break.

“We have picked up a few properties for fair and reasonable prices over the last few weeks but a lot of buyers do want to see the end of 2021,” he said.

“They will take a deep breath and come back with renewed energy. I expect you might see a spike after Australia Day for six weeks and then see an easing off, of prices.”

Originally published as Easing of house prices in Sydney and NSW comes with new worries for homebuyers in 2022