Sellers holding back as economic conditions bite hard

A LEADING real estate agency believes sellers are “shaping the market” during the post-Budget housing market in Sydney and Melbourne.

Since May, fewer properties have been coming onto the market in both cities and the total amount of stock available for sale has also fallen, according to Ray White Group.

“Rather than listings building as demand weakens, sellers are pulling back – tightening supply and changing the outlook for Australia’s two largest housing markets,” Ray White chief economist Nerida Conisbee said.

“New listings show how many properties are being brought to market, while active listings show the total stock still available for sale, including homes carried over from previous months.

“Looking at the two together helps separate a rise in seller activity from a slowdown in how quickly existing stock is clearing. 

“The change in new listings has been significant.

“Between May and August, new sales listings fell 12.6 per cent in Sydney and 9.7 per cent in Melbourne, compared with a 6.8 per cent decline nationally.

“Canberra has seen an even larger fall of 14.7 per cent. For Sydney and Melbourne, this increasingly looks like the supply-side response to a weaker market: when selling conditions deteriorate, some owners simply choose not to sell.”

Conisbee said the pullback is now flowing through to the stock of properties available to buyers.

“Active sales listings have fallen 5.6 per cent in Sydney since May and 7.4 per cent in Melbourne. Canberra is showing a similar pattern, with active stock down 7.5 per cent,” she said.

“This is important because weaker buyer demand – driven by both the post-Budget changes and higher interest rates – does not necessarily lead to a sustained build-up in properties for sale.

“Housing supply is highly responsive to market conditions. Unless an owner needs to sell, they can delay putting their property on the market when prices are weaker or buyers become more cautious.

“When enough sellers make that decision, the reduction in new supply starts to offset weaker demand.

“That appears to be happening in Sydney and Melbourne.”

Conisbee said fewer properties are coming onto the market, while the stock already available for sale continues to be absorbed.

The result is a progressively tighter balance between buyers and sellers than might otherwise have occurred following the Budget.

“The contrast with Brisbane and Perth is striking. New listings have also declined in both markets, falling 2.7 per cent in Brisbane and 10.5 per cent in Perth since May,” Conisbee said.

“But active listings have moved sharply in the opposite direction, rising 27.5 per cent in Brisbane and 20.2 per cent in Perth. Fewer homes are being newly listed, yet more properties are sitting on the market.

“That suggests the issue in Brisbane and Perth is not a rush of owners deciding to sell.

“Instead, existing stock is taking longer to clear. Adelaide is showing a similar, although less pronounced, pattern: new listings have risen only 2.4 per cent since May, while active listings are up 15.0 per cent.”

She said the post-Budget housing market is becoming increasingly divided.

“Sydney and Melbourne experienced some of the earliest and largest weakness but sellers are now responding by withdrawing supply,” Conisbee said.

“In Brisbane and Perth, where conditions remained stronger for longer, stock is instead accumulating despite fewer new properties coming onto the market.

“For Sydney and Melbourne, that seller pullback provides an important buffer against further weakness but the outlook remains fragile.

“A further interest rate rise would reduce borrowing capacity and weaken buyer demand again.”