Does a slower property market present a home buying window?

Property auctions have been much quieter lately, amid higher mortgage interest rates, lower consumer confidence and rising inflation. In short, buyers have shied away this winter, most likely due to their financial worries but possibly because it’s also been pretty cold.

Either way, this has seen some significant price drops, more rapid than we’ve had in 40 years in fact, as recently noted by AMP Capital chief economist, Shane Oliver. 

Slumping property prices tend to occur when for sale homes far exceed the number of prospective buyers. And this scenario can snowball because if there's reduced competition, the collective interest slumps too. Confidence in the market, or a lack thereof, can play a definite role.

We can see this at the moment in a few Aussie property locations such as Sydney's popular Northern Beaches, which has seen a 26% drop in auction clearance sales in the year to end of July, according to Domain's data. 

Only 50% of auctions there have resulted in sales lately, which essentially means there are a lot of homes still on offer, presumably many of them not too far from the beach. Some of those sellers will undoubtedly shift from an auction approach to a private sale as a result.

Similarly, a number of areas in Melbourne have had reduced auction activity, including the inner south (auction numbers have dropped close to 20% over the year) and the suburbs in the north west (a 23% drop over the same period), as per Domain.

Brisbane too has had some incredible plunges in auction action, where if you take the southern suburbs only, auction sales have dropped about 31% over the year and July’s clearance rate was just 39%.

So what does this all mean?

More chances for homebuyers perhaps

A drop in auction buying to this degree usually means the pendulum has swung toward buyers, even if temporarily, who for years have faced stiff competition and inflated prices. Property transactions appear to be moving much slower now, the hot air having seeped out of the bloated balloon, so to speak. 

More specifically, the number of total new listings to have hit the market in capitals are said to be up on 2021 figures when lockdowns disrupted everything. So now, with a reduced level of buyer competition and values dipping below recent medians generally, there might be a window for a first home buyer to negotiate a better price. 

Negotiating a good price will require some research though: read up on the recent sales in a particular suburb, but also have a look at auction or sale reports such as Domain’s or from CoreLogic RP Data, which can help predict buying activity in the months ahead. 

Nothing is guaranteed, of course. The Aussie property market can tick back up in a matter of months, especially as it warms up in spring. We’ve seen this happen a few times in the last decade. However, if there’s a good time to buy a home generally, it’s when buyer numbers drop off and sellers are more willing to accept a lower price point. 

Yes, home loan interest rates have been rising this year and you also need to consider this in your overall borrowing capacity number crunch. But if you’re in a position to afford regular loan repayments, many of the leading variable rate home loans are currently in the 3-4% range, which might be manageable with a lower home price in mind. 

Do your research first and be sure to compare some of the best home loans on the market, which we provide here on our Mozo Home Loans hub. Good luck!