March 15, 2023 by Dymphna

I don’t know why this works, but it does

This indicator is fairly reliable, and it suggests we’ve reached a turning point.,

How do you predict a turn in the property market?

There’s a few things I look to: rents, mortgage finance, interest rates etc.

But actually one of the most reliable indicators has been the premium property market.

For whatever reason, high end properties tend to lead the market on the way up, and on the way down. The boom harder and they crash harder.

I think it’s partly due to the constrained nature of the market. There isn’t a log of competition. So when everyone’s buying, prices soar. And when buyers evaporate, prices can collapse.

At any rate, it’s been a fairly reliable indicator in recent years.

That’s why it’s interesting to me that the premium market in our premium city (Sydney) has turned.

Some top end market are even growing at a double-digit annualised pace:

House prices in some of Sydney’s more expensive suburbs climbed as much as 4 per cent in the past three months, boosted by scarce supply and increasing demand from buyers looking to take advantage of the sharp decline in values since interest rates started rising in May.

The rebound comes as the top quartile of the market by value posted a 0.7 per cent rise in February, helping lift Sydney’s median by 0.3 per cent during the month, data from CoreLogic shows.

“The upper-quartile housing values fell more sharply, especially across Sydney where they are down 16.4 per cent from the cyclical peak, so we could be seeing more opportunistic buying activity as buyers take advantage of the lower entry point to the market,” said Tim Lawless, CoreLogic research director.

“At the moment it looks like the upper quartile of the market is leading the housing sector into stability, especially in the larger cities where the more expensive end of the market has already recorded a substantial drop in values, although I think it’s too early to call the bottom of the cycle just yet.”

Ray White chief economist Nerida Conisbee said upgraders and those with equity in their homes had found it easier to get finance and transact in this market.

“They tend to buy more expensive homes. There are also a lot of businesses and employment types that are doing very well, so that also drives activity for higher price point homes,” she said.

East Killara, Warrawee and Gordon on the upper north shore were the best performers, and house values in these suburbs rose 3.8 per cent, 3.4 per cent and 3.3 per cent respectively over the past three months, data from CoreLogic shows.

Interestingly, there’s some reports that Chinese buyers are back. They had a decent impact a few years ago, but have largely been missing in Action in recent years.

Bronwen Lipscombe, a selling agent at McGrath on the upper north shore, said there had been an influx of Chinese buyers snapping up grand homes in large lots in recent months.

“The upper end of the market continues to be strong because a lot of people at that price point are either cash buyers or they have a large amount of equity in their current dwelling, so they’re less impacted by interest rate rises,” she said.

I think Lawless is right. It’s still a bit early to say for sure.

But that’s the nature of turning points in the market. They’re never clear until you have the benefit of hindsight.

But for now, it does seem to confirm a pattern – and that’s a pattern that says that the market is finding a floor and beginning its next move upwards.