Unless you’ve been residing under your own little rock for the last five years, you’ll know that Sydney folk are experiencing some fairly standard conundrums that coincide with a runaway housing market.
The basis for all the disequilibrium is of course an ongoing imbalance, where demand for housing far exceeds supply.
Ironically, the phenomenal price growth that’s occurred as a result has also set off a surge of new apartment construction in certain parts of the city, suggesting that the imbalance may be corrected sooner rather than later.
Sure, there are still a lot of people looking to break into the tightly held market due to employment demand in particular, but with all that new housing up for grabs, a sense of stability will soon be restored, won’t it?
Maybe not…if no one wants to sell!
Sit on it
This seems to be the mantra of most Sydney homeowners at present. While you might think there’d be many a willing vendor looking to cash in on the lucrative leaps and bounds housing values have made in some areas recently, things couldn’t be further from the truth.
Interestingly, at a time when highflying real estate agents who deal with multi million dollar clients on a daily basis would, one might assume, be swimming in listings and cashing in giant commissions, it appears the opposite is actually true.
“It was as though every vendor woke up in the New Year and made a resolution not to sell,” McGrath Real Estate’s chairman Cass O’Connor recently told The Sydney Morning Herald.
No doubt seeing the money doing the rounds throughout Sydney’s prestigious neighbourhoods at the beginning of this latest, low interest rate driven property boom, compelled John McGrath’s decision to publicly list in December last year.
But since then, things in that particular part of the world have changed somewhat, with rocketing real estate prices creating “an environment in which vendors are reticent to sell, fearing they will not get back into the market,” says O’Connor.
Another unprecedented turn of events
I’ve said it before and I’ll say it again…we’re living in a time of greater turmoil and change than any other in human history. Everything seems to be unprecedented nowadays, and real estate is no exception.
Whether it’s unprecedentedly low interest rates – across both local and global markets – driving unprecedented levels of activity and in turn, unprecedented price increases, or unprecedented construction booms, nothing seems familiar anymore.
It’s the kind of environment where anything can happen…as we’ve recently witnessed…and as McGrath has apparently learnt the hard way.
O’Connor says today’s listing volumes as a percentage total of property stock are at levels not seen since the industry began collecting this data.
As more of our population begins the ageing process in earnest and we undergo monumental (unprecedented) demographic shifts, everything about the way we live is seemingly changing.
We’re downsizing to smaller accommodation and we’re staying put. A decade ago, homeowners would trade up every 6.7 years, but today we’re lingering in our homes for longer…4 years longer to be exact.
The same is occurring for apartment owners, who are now opting to move every 9 years on average, compared to every 5.9 years a decade ago.
“This city is in the midst of what economists might call ‘severe disequilibrium’: endlessly growing demand meeting newly limited supply,” says O’Connor.
Usually, this would make for the perfect supply/demand equation that a good real estate agent could cash in on. Usually. But things are not usual right now, are they?
Curiouser and curiouser
Another emerging trend McGrath’s recently fallen victim to is the creation of so-called “super lots”, where multiple vendors in one street coordinate a joint sale of their properties as a large going concern to investors seeking redevelopment sites.
Removing the real estate agent from the equation means these vendors are reaping even bigger rewards for their homes. But of course, these types of transactions are certainly not helping to balance stock levels.
The lesson McGrath has learnt from this rather dramatic turnaround in how Australians consume (or don’t consume) real estate is one we would all do well to consider in the property industry.
Nothing is set in stone right now. The world is an ever larger, ever less predictable place. The past is no longer an accurate reflection of what is to come for any of our markets, housing included. So we should take nothing for granted.