Property sellers are beginning to reduce their asking prices as buyers grapple with the steep costs of housing, hinting at potential further declines later this year.
According to data from SQM Research, asking prices for all homes in Sydney dropped by 1% in the month ending August 6, with Melbourne seeing a 0.9% decrease. These figures include properties that didn’t sell at auction and have since transitioned to private treaty sales.
The overall dip in prices was largely driven by more significant declines in house prices, which fell by 1.3% in Sydney and 1.4% in Melbourne. However, the market saw some resilience as unit prices increased, rising by 1.2% in Melbourne and 0.2% in Sydney, indicating a growing demand for more affordable housing options.
This trend is emerging as more homes become available in Sydney and Melbourne, following an increase in overall property listings up to July. Auction clearance rates have recently fallen below 70%, meaning over three in ten homes are failing to sell at auction, signaling a more balanced market.
Louis Christopher, Director of SQM Research, noted that a drop in asking prices is a strong indicator of future house price movements. He explained, “Asking prices have historically been a good predictor of actual prices, so we’re anticipating a decline in housing prices for the September quarter. When vendors lose confidence, they’re more willing to negotiate, which is essentially what’s happening now.”
Christopher also pointed out that earlier expectations of interest rate cuts, which didn’t materialize, contributed to the loss of market confidence. “At the start of the year, many expected a rate cut in the March or June quarter, but when that didn’t happen, confidence waned,” he said.
PRD Chief Economist Dr. Diaswati Mardiasmo echoed this sentiment, stating that sellers are being forced to adjust their expectations due to cautious buyers. “Buyers are out there, but sellers are realizing that the prices they were asking for aren’t leading to sales,” Mardiasmo said. “That’s why we’re seeing a drop in asking prices—they want to sell their properties faster, and we’re noticing an increase in the time it takes to sell.”
Even though the cash rate remained unchanged on Tuesday, Mardiasmo expects buyers to remain cautious as they face prolonged higher mortgage repayments.
Clarence White, an auctioneer from Menck White, described Sydney’s property market as stagnant for several months. “It’s been challenging with low buyer confidence. The market is gripped by caution and uncertainty,” White said, adding that many buyers are still waiting for a rate cut.
White also noted that sellers who set their asking prices too high are struggling to engage buyers. “If prices aren’t set correctly, it can be a costly mistake. This is pushing agents and vendors to offer more attractive price guides. Buyers are cautious, and they’re looking for value.”
He predicted that this cautious environment will persist until interest rates drop, leading to a “delicate and tentative” market.
Joseph Luppino, Director and Auctioneer at Village, highlighted that the fall in asking prices in Melbourne reflects a broader market pullback. “The market is pulling back due to serviceability issues. With interest rates effectively tripling, people’s borrowing capacity is stretched to the limit.”
While Luppino acknowledged that buyers still face challenges with high mortgage repayments, he observed that competition in the market is easing. “The buying process is less stressful with more choices available and less competition,” he said. “However, the struggle now is whether buyers can meet sellers’ expectations given their financial limitations. It’s a tough balancing act.”
