With rising interest rates, runaway inflation, global economic uncertainty and a change of government, the economic backdrop to 2022 looks very different from 2021.
And yet, property in Darling Point has outperformed the Sydney average by some margin.
We look at what impact broader economic and political trends are having on the Darling Point property market.
The impact of rising interest rates
In May this year, the RBA lifted the official cash rate for the first time in over a decade – taking it from its emergency level of 0.1% to 0.35%. It then lifted the official cash rate by another 0.5% in both June and July, so it now stands at 1.35%.
The RBA says it will continue raising rates until monetary conditions are ‘normalised’ and that it will be guided by both incoming data and its assessment of the outlook for inflation and employment. Some commentators believe this means it won’t stop until the official cash rate is around 3%. This would mean home loan interest rates would be in the range of around 6%.
The effect on the market
Rising interest rates aren’t necessarily having a major impact on affordability in our local property market. Mortgage stress is not as significant an issue here in Darling Point as it is in some parts of Sydney’s Eastern Suburbs, according to a recent report. In fact, my experience is that many recent buyers are downsizers with no mortgage at all.
At the same time, interest rates still aren’t very high by historical standards and are unlikely to even get to the 30-year Australian average of close to 7%. We’re unlikely to see a return to the late 80s or early 90s, where homeowners really did face crippling mortgage rates.
Where it does seem to be having an effect, however, is in the lack of clarity. The mere fact that rates are rising – and no one knows exactly where they will stop – is causing some people to pause the activity, whether that means buying or selling. Added to this is the general economic uncertainty that’s stemming from rising inflation, a sliding share market and unpredictable world events.
The recent change of government
Earlier this year, even before rates began rising, we saw people holding off on property transactions because of the upcoming federal election. Elections almost always lead to less property market activity. This year was no exception – even if it was not as pronounced as in 2019 when the Shorten-led Labor Party pledged to end negative gearing and end the capital gains concession for property.
Once an election is over, property market activity tends to return but this year that didn’t really happen. This wasn’t necessarily a reflection on the result but more that low activity from the election led straight into rising inflation, economic uncertainty and interest rate rises. The property market was never given the chance to recover.
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Listings still tight in Darling Point
This lack of activity can really be seen in the number of property listings. SQM data shows the number of local properties for sale fell to just 48 in June 2022 – 3% lower than the same time last year.
In fact, a lack of stock for sale has been a real issue in Darling Point for some time, with less than half the number of properties for sale in recent years than a decade ago. The current conditions are adding to this.
Where the Darling Point property market stands right now
It’s this lack of supply – combined with continued demand – that has helped Darling Point continue to perform. In fact, realestate.com.au is reporting that the median unit sales price has risen 51.9% over the past 12 months to now stand at $2,925,000. In comparison, the median Sydney home value is now up only 5.9% compared to a year ago, according to the most recent CoreLogic data.
Domain data also reveals that our suburb’s auction clearance rate ranges from 60% for two-bedroom apartments to 80% for one-bedroom apartments. That’s a remarkable figure when you consider that the Sydney-wide auction clearance rate has dipped below 50% in some recent weeks.
There’s no doubt that Darling Point remains a good place to buy property, even in a turning market such as this one.
Over Sydney’s Winter, we’ve observed that many of our buyers and sellers are travelling overseas, making the most out of the Northern Hemisphere Summer and ability to travel after two years of the pandemic and lockdowns. We expect sales activity in Darling Point to increase in Spring and Summer 2022, as they return home and we see the traditional selling season kick off.
If you’d like to know more about our local property market in Darling Point, or if you need help buying or selling a home, get in touch.