“Buyers’ market” conditions to ease as listings decline?

New data from one of the nation’s biggest real estate chains suggests the recent surge in properties coming onto the market for sale is ending.

Ray White says the biggest falls in new property listings are in Sydney and Melbourne, suggesting the “buyers’ market” conditions in Australia’s two largest cities may be coming to an end.

This suggests some of the heavy vendor discounting that’s been reported, particularly in Sydney and Melbourne - which have experienced little or negative price growth recently - may be a short-lived phenomenon. 

The details

Ray White’s listing authorities data - the formal agreements between vendors and agents - “provides valuable insight into future market supply,” according to the real estate chain.

“Particularly as we command over 15% market share, these metrics offer a meaningful snapshot of broader market trends,” the firm says in its latest edition of “Ray White Now” - a regular housing economic snapshot.

“The surge in properties for sale appears to be coming to an end, based on an analysis of Australian listing volumes,” says Ray White’s Chief Economist Nerida Conisbee.

“Total volumes are becoming more similar to what was seen at the same time in 2023 and 2022.

“But like (property) prices, there are considerable regional variations.

“Year on year, the strongest markets of Perth and Brisbane are still recording an increase (in listings).

“Whereas Melbourne and Sydney are seeing the biggest falls in properties coming to market.” she says.

The Ray White numbers showing falling new listings are significant, as they follow reports of heavy discounting by eager-to-sell vendors in Sydney and Melbourne.

According to data from SQM Research, vendors in Sydney have been dropping asking prices by around $13,000 on average or 0.9%, while Melbourne sellers are taking $7,200 or 0.7% on average off asking prices, as listings reached their highest level in nearly six years.

“Vendors are losing confidence because there are more properties for sale than buyers, so they’re cutting their prices,” SQM’s Managing Director Louis Christopher told the Australian Financial Review, which reported that vendors in some well-to-do areas of Sydney were slashing prices by up to 11%.

The price discounting - which is said to have started in October - comes as the latest CoreLogic Home Value Index shows value falls of 0.2% in Sydney and 0.4% in Melbourne in November.

Rival data analytics firm PropTrack - which bases its data on prices, not an estimation of value - recorded Sydney dwelling prices edging up 0.08% in November, with Melboune easing slightly, down 0.07%.

Ray White’s own Neoval price gauge shows that despite the reported vendor discounting, house prices across Sydney were flat in November, while unit prices grew 0.1%.

Neoval also measured price increases of 0.1% during November for both houses and units in Melbourne.

Whether prices and values in Sydney and Melbourne are in slightly negative or slightly positive territory at the moment, the fact remains that in the current climate, vendors are more likely to entertain offers below their asking prices - offers they might not have considered a couple of months ago.

However, as fewer listings come onto the market and the existing pool of housing for sale gets soaked up by still strong demand, that mindset is likely to change.

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Ray White’s falling new listings numbers appear to be supported by auction data from CoreLogic, which reported 2,492 capital city homes scheduled to go under the hammer over the weekend of the 7th and 8th of December 2024.

The number was down from 2,881 scheduled auctions the previous weekend, and significantly down on the 3,042 reported on the same weekend last year.

High-profile Melbourne developer Max Shifman, a past president of the Urban Development Institute of Australia, believes his prediction of a bounce-back in Melbourne prices is coming true.

He’s been arguing that many big apartment projects just don’t stack up in the current economic environment with high interest rates and labour shortages.

However, with strong population growth and an underlying housing shortage, this will just compound problems in the medium term, particularly in a fast-growing city like Melbourne.

“I’ve previously stated that the Victorian housing market finds itself in an unusual spot,” he says, “a supply/demand mismatch, led by elevated listings from investors exiting the state, would depress pricing for the foreseeable future - that is, until the overhang is absorbed.

“I also said this would create a short-term opportunity for those entering the market, at the expense of longer-term housing supply, and especially for renters.

“My guess is that as soon as the Melbourne market starts to turn… we'll see a sharp swing into an undersupply of housing to buy and rent alike.

“And with the current low levels of new approvals and starts, plus long-lead times, the State will struggle to make up ground on new housing supply for a very long time,” Mr Shifman says.

“This short-term reprieve will be just that - short term - with even bigger housing challenges to come.”

And that scenario sees an entrenched “seller’s market” for the small number of properties for sale in Melbourne, coupled with strong price growth.