As we lead into Spring, there is the predictable hype around the property market; this is the time of the year when we typically see a flurry of listings activity, as vendors take advantage of the warmer weather.  Flowers are starting to bloom, lawns are greener and prospective buyers are more inclined to emerge from their winter hibernation.

While it’s easy to feel exuberant about Spring, the reality is that the next few months may be more of a spring listing season than a spring selling season.  The housing market has been doing it tough through winter; values are trending lower across half of the capital cities, while the other half have seen a reduction in the rate of capital gains.  There are fewer buyers on the ground, with settled sales activity down 12% year-on-year across the combined capitals.  Auction clearance rates have been coasting through the low to mid 50% range across the major auction regions and private treaty sales are taking longer and vendors are having to reduce their initial list price by a larger amount in order to sell.  Although mortgage rates remain very low, housing credit policies are generally tight and investors continue to be charged mortgage rate premiums relative to owner occupiers, which is making it harder for prospective buyers to enter the market. 

Another factor that could exacerbate the already tough conditions as we approach the Spring season is how much housing stock is already for sale.  Total listing numbers are almost 8% higher than a year ago across the combined capital cities, largely driven by a surge in advertised inventory across Sydney where there are 21% more properties available for sale relative to last year and Melbourne where listing numbers are 12% higher than the same time last year.

Advertised stock levels are already trending higher; the first week of July marked the low point in listings activity, which was a week earlier than last year.  Fresh listings have been consistently rising since then.  Importantly, the number of new listings being added to the market is about 4% lower that at the same time last year, implying weaker confidence amongst vendors.  But because the rate of stock absorption has slowed due to fewer buyers and longer selling times, total advertised stock levels are now tracking at the highest level for this time of the year since 2012.

With more stock set to hit the market through Spring, vendors are likely to be more competitive and buyers could be spoilt for choice. 

Prospective buyers can take their time, negotiate harder, and move on to the next property, if they don’t achieve a price they perceive as fair value.  Vendors will need to be realistic about their price expectations and do their absolute best to ensure their property is professionally marketed and presented in its best light.  Overall, while the number of listings is likely to rise through Spring, with values already in decline across the nation, we are not expecting a particularly strong Spring this year.  Furthermore, as auction volumes rise, clearance rates typically fall throughout Spring and we may see them dip below the 50% barrier later this year.