A unique spring selling season on the horizon

Despite the arrival of the spring season, sales activity is expected to be a little different this year as mortgage rates, weak consumer sentiment and stretched household budgets begin to bite.

Head of Research at CoreLogic, Eliza Owen said buyer segments may perform differently than others this year, and there’s likely to be a variety of activity levels throughout different regions. 

An interesting phenomenon in the current environment is that long-term owner-occupiers are more likely to sell, according to Ms Owen.

“An interesting feature of a housing market in decline is average hold periods of sold properties rise,” Ms Owen said.

“Twelve-month hold periods have been elevated amid the current downturn, as well as the downturn from 2017-2019.”

“This is because recent buyers are at more risk of making a nominal loss if they sell during a downturn. 

“Meanwhile, those who have held their property for longer are more likely to have made nominal gains, even if the market is going through a short-term, cyclical downswing.” 

Recent CoreLogic research suggests home values have generally trended higher over time, and increased more than 380 per cent in the past 30 years

Meanwhile, national home values are sitting just 4.7 per cent higher over the past 12 months, with annual value changes likely to hit negative territory over the course of the cycle. 

According to Ms Owen, new listings and auctions will rise in the coming weeks.

“Despite new listing counts still trending lower, there are some data points that indicate a lift is on its way in the next few weeks,” she said.

“For example, ‘CMA activity’, which is a count of the Comparative Market Analysis reports generated across CoreLogic’s RP Data platform, is a leading indicator of rises and falls in listing volumes. 

“In the final seven days of August, CMA volumes rose 8.2 per cent, indicating that the seasonal lift in new listings is about to take off.

“The lift in listings is also expected to flow through to the auction market, where the number of properties going under the hammer across the combined capital cities typically lifts from September, and continues rising through to the start of December.”

Ms Owen said she expected the seasonal uplift in new listings to vary between regions.

“In the five years prior to the pandemic, new listings campaigns nationally have increased 19.6 per cent on average between winter and spring,” she said.

“The seasonal bump varies between cities, with cooler climate areas like Canberra (42.4 per cent), Adelaide (33.7 per cent) and Hobart (31.6 per cent) typically seeing a larger seasonal effect than more temperate markets.”

Ms Owen said between 2015 and 2019, the volume of new listings added to the market has, on average, doubled across Adelaide Hills in this period. 

“Many regional, lifestyle areas like the Mornington Peninsula, Yass Valley, Surf Coast and Huon Valley see a notable uplift in new listings through spring,” she said.

“Given home values across Adelaide have only just passed a peak in value, many sellers across the city may show interest in ‘cashing in’ this spring selling season. 

“Despite a 0.1 per cent fall in the CoreLogic Home Value Index for Adelaide, values are still almost 45 per cent higher since the onset of Covid in March 2020.”

Ms Owen said transactions won’t surge as they did in 2021.

“2021 had a particularly ‘bumper’ spring selling season, which is unlikely to be replicated this year,” she said.

“CoreLogic estimates there were 154,294 new listings added to the market through spring 2021, higher than the previous decade spring average of 144,985. 

“Late 2021 also saw record-breaking auction volumes, with the highest count of auctions on record over the week ending December 12th (4981). 

“More listings were likely concentrated at the end of 2021, because rising COVID cases and extended lockdowns across parts of the country would have made it difficult to sell from June to early October.

“In other words, sellers were playing ‘catch-up’ as pent-up demand from vendors was unleashed once lockdowns ended.” 

Ms Owen said annual capital growth rates averaged 21.3 per cent nationally through spring last year, creating a big incentive for vendors to ‘cash in’ on price booms. 

“Coming into spring 2022, market conditions are very different,” she said.

“Buyer appetite is falling against higher interest rates, properties are taking longer to sell, and vendors are having to offer greater price discounts in order to get deals done.”

Ms Owen said she expects buyers will be more flexible on price than last year.

“While both buyers and sellers become more active during the spring selling season, this doesn’t make it a seller’s market,” she said.

“Properties are taking longer to sell, with median days on market up to 33 days in the three months to August, which has increased from a low of 20 days in November last year. 

“The discounts between initial listing prices and contract sale prices (otherwise known as ‘vendor discounting’) has also become larger with the median discount sitting at four per cent nationally. 

“Similarly, auction clearance rates across the major auction markets are consistently below average. 

“Serious vendors will need to be realistic about their price expectations and ensure they have a quality marketing campaign behind the property in what is likely to be a more competitive selling environment through spring and early summer.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.