Last Saturday I oversaw the auction of my grandmother’s house in a south-western suburb of Sydney. And it was not the exuberant fireworks display I was hoping for.
The word ‘fizzer’ comes closer to the mark.
At first, things looked promising. A healthy troupe of (what looked like) bidders turned up and poked about the place – measuring doorways, peering into cupboards, making sure the toilets flushed – before congregating in the backyard.
At the advertised time, the auctioneer strutted onto the lawn and delivered his spiel. After puffing the old place up until you wondered why the Queen herself hadn’t snapped it up pre-auction, he asked for an opening bid.
“Did I mention how quiet the neighbourhood is?” he cracked.
A lacklustre titter or two, then more silence.
Finally, after an excruciating lull, a furtive voice piped up with an opening offer. It was well below the reserve, but it was a start.
Peaking out from behind the dining room curtains, I rubbed my mitts together and waited for the bidding war to begin.
One bid was all we got.
One bid! So much for the exuberant Sydney property market.
In isolation, anecdotes like that don’t tell you much. But other evidence suggests my underwhelming experience was part of a new trend in the famously booming Sydney property market.
According to figures from Domain released on Thursday, the median house price in Sydney fell by 1.9 per cent over the three months to September. Apartment prices fell 0.8 per cent.
This corroborated figures from CoreLogic, released the previous week, showed average property prices across both houses and apartments fell in September by 0.1 per cent.
It would seem, then, that statistic and anecdote agree: the heat has well and truly gone out of the Sydney property market. And, all things considered, it’s about time.
At the end of September, the average house in Sydney was worth $1.17 million. Just over 10 years ago, that same house was worth less than half that – $520,000.
That’s a 10-year growth rate of 125 per cent, or 12.5 per cent per annum (non-compounded).
To put that in context, over that same period, the ASX 200 fell by 15 per cent (thanks to the GFC).
The aggregate average price of consumer staples (the measure of inflation), meanwhile, rose by just 25 per cent over those 10 years – or 2.5 per cent per annum.
And most importantly, because that’s how most people pay their mortgages, wage growth has stood, on average, at around 3.4 per cent per annum.
House price growth in Sydney has, in other words, been astronomical, and wildly out of step with the rest of the economy.
This growth has made a lot of people wealthy. But it has burdened others with absurd levels of debts, and shut yet more out of the housing market altogether.
So, while it may be a bit disappointing for homeowners who are coming to the market just as the party is ending, the fact is this is a cooling that absolutely had to happen. As long as it is a gentle cooling (which so far it has been) and not a crash, it should be welcomed.
As for my grandmother’s house: eventually the auctioneer and her real estate agent managed, in private, to talk that one furtive bidder up to the reserve price.
A bit disappointing perhaps; but, still, it was a much better price than you’d get for the same property anywhere else in Australia – not to mention a 7000 per cent return on what my grandparents paid for the place 50 years ago.