Clearance Rates Are Dropping In Sydney
Although the top end remains quite robust, time on market is increasing and clearance rates dropping. The traditional hot spots of inner city apartments are seeing some stress with newly completed apartments getting price reductions.
Historically rising interest rates and rising unemployment cut the legs out of the Sydney property market. This time it’s different. Firstly a tightening of bank lending to investors is finally having the effect that the Reserve Bank wanted. The second barb is the clear evidence that Chinese buyers are taking a back seat after tighter capital controls on moving money to Australia. Both factors have had a dramatic effect and left the Sydney property market in the Winter doldrums. One typical example is the old Shore Club at South Steyne in Manly where the Chinese owner has had to cease work as the money has run out and capital is being restricted from China.
The good news is that interest rate sensitivity is very high at this point in the cycle, so any adjustments by the Reserve Bank should be small and graduale. I have also started to see some great and profitable development sites come back on market after developers have failed to obtain funding for settlement. This is also usually a good warning indicator for future price stress. It’s becoming more evident that this could be a very cold winter for the Sydney property market.