Property prices in Sydney and Melbourne: the Omicron effect creates uncertainty in the market
Property prices in Australia are facing a seismic shift with the formation of “two very different property markets”. And the consequences could be enormous.
As 2021 drew to a close, a wind of change was blowing through the Australian property market.
Adjudication rates were falling, house price growth was slowing and Melbourne house prices were posting their first monthly declines in more than a year.
Thinking the worst of the pandemic was behind us, people started putting up signs for sale, with the volume of new listings increasing as more sellers finally felt comfortable letting people into their homes. .
Then, as more and more homes came on the market, the frantic conditions we had seen began to calm down as potential buyers had more homes to choose from.
The real estate market has finally stabilized.
At the time, some believed that 2022 would mark a major test for the Australian property market. With the market slowly draining, the effects of the pandemic on price growth fading, and more forecasts of future price declines looming on the horizon, this was bound to be the year market normality could return.
Then came Omicron.
The pre-pandemic trend
Before Omicron sent the nation into a shadow lockdown, auction clearance rates in the country’s two main auction cities (Sydney and Melbourne) were declining from recent highs, according to data from SQM Research.
In Melbourne, they peaked at 63.7% on the weekend of October 3, before dropping to 45.8% on the last big auction weekend of the year on December 19.
In Sydney, it was a similar story. Clearance rates peaked on September 19 at 70.8%, before dropping to 47.6% on December 19.
SQM Research founder Louis Christopher had this to say about auction clearance rates in a recent Twitter feed“First and foremost, auction rates are an indicator of momentum. So if the absolute clearance percentage tells us anything, it’s the direction that’s just as important.
“I will be increasingly bullish on the market if I see clearance rates at 40% and rising. And I will be more and more bearish if the clearance rates are at 60%, but falling. »
This drop in auction clearance rates was heavily influenced by much higher levels of auctioned inventory.
Between the time of their respective liquidation rate peaks and the last auction of the year, the number of properties going under the hammer increased by 152% in Melbourne and 95% in Sydney.
The mood changed everything
Over the past few weeks, the country has faced major challenges due to the impact of the Omicron variant on businesses and supply chains.
In this, real estate agencies have not been spared.
According to real estate market insider Edwin Almeida of Ribbon Property Consultants, some agencies have seen up to 80% of their staff miss work due to the Covid-19 contraction or isolation due to a close contact.
In terms of the broader market, Almeida thinks the Omicron variant could prove a seismic shift in market fortunes, at least in the short term.
“The ‘Cron Effect’, as I like to call it, has really created two very different real estate markets and has completely reversed sentiment from the end of auction season last year,” Mr. Almeida.
“On the one hand, independent homeowners are increasingly concerned about letting people into their homes for inspections and delaying listing of their properties. At the same time, the effects of the pandemic continue to drive strong housing demand.
“Apartments are a whole different matter. Listing volumes continue to remain strong and overall this subset of the market could face a much tougher time.
Asked about his outlook for house prices for the year ahead, Mr Almeida said house prices in Sydney could rise by double-digit percentages again if the virus continues to remain a major problem, particularly with the reopening of international borders to wealthy overseas buyers looking to buy high-end Australian homes.
The year to come
How things evolve from here is largely up to Omicron.
In other words, the future of the real estate market is very uncertain, given the degree of influence the virus will have.
If Omicron passes relatively quickly and Aussies feel comfortable putting their homes under the hammer again in record numbers, as they were towards the end of last year, the downward trend in sentiment on the market could still pick up.
However, if Omicron remains a factor preventing owners from putting their properties up for sale and if other potential moves impact sentiment over the winter, the property market could see a further price increase due to a relative stock shortage.
Ultimately, if the nation faces further challenges from the pandemic over the coming year, it may once again be homeowners who stand to benefit, while those without homes will face an even tougher battle with the virus and the security deposit they need to save that is always just out of reach.
Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator