Negative Sydney property market sentiment turned on more than a sixpence

Jonathan ChancellorOctober 19, 20150 min read

Sydney's recent weakening clearance rate is likely to be joined in a decline in its median house price.

Another nail in the boom coffin.

The shift in sentiment seriously emerged last week with those three economist forecasts and then a Westpac rate rise. 

They were forecasting not just an end - or softening - to the property boom, but rather boldly putting a figure on the size of the price fall. 

The biggest mooted was a 7.5% drop over the next two years from Macquarie Research analyst James McIntyre in a report titled Aussie Macro Outlook: Population & Housing - Perishable. SQM this week brought a bit of balance forecasting 2016 would certainly see a slowdown in growth, but no Sydney reversal.

I was surprised by the swiftness of the sentiment change to negativity - seen in the fall to a mid-60s clearance rate - but Sydney has always been able to turn on a sixpence.

I think one of the contributing factors in the latest shift towards negativity actually arose when Sydney turned on its $1 million median price suggestion back in July.

Buyers, quietly and sensibly, said enough is enough. Enough 15% annualised growth since its 2012 origins.

In July this year Domain's senior economist, Dr Andrew Wilson, calculated and crowed that house prices had spiked 8.4% over the June quarter to a $1,000,616 Sydney median house price.

I thought it was a bit of a stretch, and that $616 hardly clearly the hurdle with confidence, though the May RBA rate cut had certainly helped the spurt in Sydney's median.

According to the accompanying Fairfax Media overload spin, Sydney's median was higher than than average house price in London and fast approaching New York.

I'd anticipate the upcoming Domain House Price Report, may well send Sydney into reverse, ie a median price back below $1 million.

Will the dip in the overall Sydney median really mean prices are falling? Reckon we will have to await a few more Sunday morning newspaper headlines to judge the wind direction.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.
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