Higher rates, amid rapid growth in the cost of living, triggered a collapse in consumer sentiment which flowed through to a significant slowdown in the demand to buy real estate.

This saw home prices fall as demand cooled and eight consecutive rate rises slashed the amount buyers could borrow. This year, conditions have shifted again.

Despite another four rate rises which, all else equal would imply lower prices, we’ve seen the opposite occur. Home prices have defied expectations and steadily risen every month this year.

In a further sign that selling conditions have improved, over recent months, the auction clearance rate has consistently held above the levels seen during the back half of last year.

But despite all this, sentiment towards selling remains low.

New survey reveals changing attitudes

The fact that people are hesitant to sell can be seen in a longitudinal survey of property owners conducted by REA Group.

Back in March 2022, 61 per cent of property owners looking to sell considered it a good time to do so. By March 2023, this had fallen to just 33 per cent.

The motivation of vendors in market has also shifted. In March 2022, the main reason vendors thought it was a good time to sell was ‘high buyer demand’, cited by 34 per cent of sellers, followed by ‘prices are high at the moment’, cited by 31 per cent. Just 13 per cent stated the main reason they were selling was because it ‘suits my personal circumstances’.

One year later these motivations have reversed, with ‘suits my personal circumstances’ the number one reason for selling, while just 15 per cent were selling because of ‘high buyer demand’.

This shows that perceptions of buyer demand contribute to when vendors choose to bring their properties to market. It also reveals that low vendor sentiment is one factor contributing to fewer properties being listed for sale.

There were 19 per cent fewer properties listed for sale across Australia’s greater capital cities in May of this year compared to last. Ironically, this lower supply of properties for sale has contributed to the improved selling conditions that have emerged this year.

While buyer demand remains well below the peak levels seen during the height of the boom, there have been clear signs of recovery in recent months.

The total number of unique visitors looking to buy property on realestate.com.au has risen and this has translated to more enquiries. But the limited stock of properties for sale remains a key challenge for buyers.

However, once it’s clear that interest rates have reached their peak, market sentiment is likely to improve. This will help to restore confidence among buyers and sellers and could potentially lead to a very busy spring.

Sourced from realestate.com.au