Declining property prices may be good for home buyers but they have a devastating effect on sales volumes. Residential property prices on a national basis have backtracked to levels of 2.5 years ago but national conveyancing volumes have sunk to levels of six years ago.
The following commentary relates mainly to Sydney and Melbourne which have suffered the greatest recent falls in dwelling values and sales volumes.
The continuing downturn in dwelling values has been exacerbated by tighter credit availability and a reduction in overseas buyers. Stunning figures have been released by FIRB showing that foreign investment real estate approvals in financial year 2017/18 were 75% lower than their peak in 2015/16.
There are two positive signposts for sales volumes: The rate of decline in dwelling values is slowing and vendors are holding back from listing their properties for sale.
Sydney dwelling values are down by 10.4% over the year to February 2019, whereas they were down by 12.3% for the year to January 2019.
Both Sydney and Melbourne experienced a decline in dwelling values of around 1% in February 2019.
If dwelling values stabilise, buyers will have no reason to delay purchasing because of an expectation of paying less in the future.
While the number of residential properties on the market is still greater today in both Sydney and Melbourne than it was 12 months ago, more potential sellers are keeping their properties off the market.
New listings in Sydney were down by 25.3% for February 2019 compared to February 2018. In Melbourne it was down by 22.9%. We are heading for a situation where the number of properties on the market will be less than 12 months prior which will support prices and create more competition amongst buyers. These are conditions that typically result in increased sales volumes.
Of course, economic and political factors can disrupt these new trends but if they continue, sales volumes will have passed through the bottom of this cycle.
Note: Quoted statistics from CoreLogic