Matt Nicastri is a senior agent here at Cunninghams and located in our Dee Why office with over a decade of experience in the industry, Matt has navigated his clients through many changing markets.
This week, Matt has taken a deep dive into current market conditions, giving some sound advice to both buyers and sellers by looking back at the last few months in this transitioning market.
It’s no secret that most markets have cooled since the peak in October 2021, and we are now entering the price consolidation phase after sustained and sometimes rapid periods of growth during 2020/2021. I think it’s important to put this in context when the media is reporting a downturn in the market. According to CoreLogic home values in Sydney fell by a nominal 0.2% for the month of March, which the media reported readily, but what is also being reported that further falls of another 10% and in some cases headlines of 15%+ are a possibility. It was discussed in our weekly meeting with the whole sales team that anecdotally prices had already fallen by 5-10%+ in some cases. What is the reason for this? Corelogic data (the most reliable data source) relies on settled results, which means they are 6-12 weeks old, so if the reports are that prices will decline 10% from peak to trough, is it possible we’ve just about seen this consolidation already? We think so!
Rising interest rates! I hear you say, and I totally understand this will put further pressure on household budgets but we believe that a rise of .25% to .5% in the next 12 months has already been priced into buyers’ decisions. It is so universally accepted that this will likely be the case – we wont know if it will eventuate, they may also stay steady at record lows and that is a decision for the RBA.
Another conversation that we’re starting to hear out in the market from regularly speaking to buyers, is that they are now re-entering the market given that prices have settled, and market is operating at a steadier pace. We are especially hearing this conversation from those that took a plunge into the property buying circuit 6-12 months ago without any success, and can now sense some more stability. This is how a floor in the market gets established and why the market doesn’t free fall 10%+ overnight, buyers fundamentally want to live here on the Northern Beaches and there will always be a tipping point of what represents good value to the market, and buyers jump back off the fence and into the market. This usually happens very quickly and often in unison with the herds of other buyers, so definitely remain cautious in your decision-making process, but don’t miss the opportunities!
Buyers – right now is a great opportunity to buy a property at a reasonable level – don’t wait for the market to fall another 5-10%. I’d encourage you to look back at the very few times this has occurred in the last century, and certainly not when unemployment is at 4%.
The first thing that needs to be said is that properties in the most desirable pockets of Northern Beaches are still performing very well. We recently broke the all-time suburb record in Allambie Heights, TWICE in a month (not some obscure record for a particular segment of market that we’re all sick of hearing).
However, for those property types that are compromised in some way, i.e., main road/arterial road location, floor plan challenges or not much yard etc., we consider that these properties require more finesse and are taking longer to sell, many times at a discount from the peak in October. Again, it’s important to have some context around this, and right now you may be selling your home at the price you would have in January 2021 before the market continued to grow another 5-10% until October.
We appreciate this transitionary phase of the market is very difficult for vendors, for every media report that is still reporting an auction result of 1million dollars over reserve, there are 99 other vendors that may have had to take a little less – it’s hard one to believe if you’re one of these vendors having this experience right now, we get it.
Very often, a vendor’s self-appraisal of their home’s value will be out of line with the market. It’s natural to be proud of your home but that can make you biased. A little bit of pride mixed with a dash of misinformation can put your expectations way above fair market value and this is magnified during and after a boom. Pricing is probably the most difficult part of the selling process for vendors to come to grips with. A vendor’s biggest challenge is usually understanding and getting comfortable with the fair market value of their home.
So how do we now look at price? In two ways, and one is now more accurate than the other! Traditionally, we would put more of an emphasis on recent local sales for similar homes/apartments and potentially add the rate of growth between those sales and when your home would be going to market. However, right now, our firm expertise of what real active buyers would be willing to pay for a property with your attributes is more important than ever, combined with what is currently on the market in your price range (and how long it has been on market for).
The latter methodology is where Cunninghams have always set us apart in times of transition, we understand our buyers better than any other agency because of our level of activity and our shared knowledge across all 4 offices and 35 sales team members. Now more than ever, it’s important to have experienced professional agent on your side as the market will no longer forgive mistakes.
One of the newest emerging trends we were seeing is that new properties come to market post Easter at price points that represent the current reality of the market are performing very well – evidencing all that I have said above around accuracy of pricing a property to be absolutely true. Like it or not, the property market is very price sensitive – especially after a boom when the fear of missing out has been replaced by the fear of paying too much.
We’re looking forward to getting this disjointed period of April/May out of the way for the market to establish the new status quo and properties can then trade more freely across the market.
Would love to hear your thoughts on the market also!
Matt Nicastri, Cunninghams Dee Why