Zoran's Blog: Sydney auction clearance rate 50%, only 37% total value compared to a year ago

https://www.domain.com.au/auction-results/sydney/
https://www.buildsydney.com/sydney-auction-results/
https://www.yourmortgage.com.au/mortgage-news/why-sydney-buyers-tend-to-let-perfect-homes-slide/255582/
http://www.abc.net.au/news/2018-08-29/mortgage-mirage-exposes-number-of-australians-in-debt-distress/10175248
https://www.macrobusiness.com.au/2014/12/the-history-of-australian-property-values-redux-2/
https://www.corelogic.com.au/sites/default/files/2018-01/2018-01--QuarterlyauctionmarketreviewDecember.pdf?elqTrackId=0be1fed01ee84a0ba3b2b222b1037254&elq=ebca660635ac4480b1e5cf0b31bf0960&elqaid=153&elqat=1&elqCampaignId=28
The Sydney details show significant decline, here is a comparison from yesterday and a year ago (14/10/2017):
Yesterday: Number of auctions listed: 550, properties sold: 197, auction clearance rate: 50%, total sales: $140 million
Last year: Number of auctions listed: 721, properties sold: 368, auction clearance rate: 68%, total sales: $377 million

The total sales is the most concerning figure that it shows massive decline...$140m is only 37% of last years $377m.

Compared to a year ago there are more now 22.5% more property listings in the Sydney market (supply), yet less demand (as significant number of potential buyers have their loans rejected due to tighter lending practices)......hence property prices are declining. Other long term risks are:

increase in interest rates
abolishing negative gearing
large number of mortgages moving from from interest only to interest and principal
some kind of global shock that leads to increased unemployment (US market crash - now longest bull market @ 9.5 years, China trade war)
class action against the banks by home loan customers that can no longer afford home loans - after royal commission findings of lax and even fraudulent lending practices

Ultimately the trend is your friend...why buy now when the trend suggests Sydney property prices will be even lower?

Sydney property prices have not always had hyper growth that was significantly over and above inflation. Here are Sydney house prices from 1960 to 2017:

Long term history shows that property prices can be flat for decades . Nigel Stapledon completed his PhD on the history of the residential property market and it is a goldmine of housing-related data and analysis.

There was a colossal land boom of the 1880s, followed by the equally large bust of the 1890s, a period of euphoric and very irrational expectations. From 1887 to the peak in 1891, housing prices increased by 32 per cent, only to collapse by 31 per cent over the next half a decade. Prices remained stagnant until the early 1920s before lifting by 25 per cent, only to fall once more during the Great Depression. The housing market again stagnated, tracking the rate of inflation until 1949. Hence for half a century (roughly between 1900 and 1950) property prices were flat just tracking the rate of inflation:

Update 21/10/2018 - Sydney auction clearance rate 44%:

Please note the published clearance rate is the "preliminary" rate, the revised/final clearance rate is reported seven days after preliminary rate with more reported results included. Typically it is lower as many real estate agent choose not to submit results as they do not want to advertise that they failed at auction! During the last few months the final results are ~5% lower than preliminary results...hence Sydney final auction clearance rate is likely to be 44% - 5% = 39%!!!

There are three previous occasions when Sydney auction clearance rates hit the 30s. That was Oct/Nov 2008 (GFC), May 2004 (NSW vendor stamp duty) and July 1989 when the cash rate hit 17%.

With the Wentworth by election and polls it is now clear that Labour will win the next election and they promised to reform negative gearing, hence there will be lesser demand for property by investors...hence prices are going to go down!

https://www.alp.org.au/negativegearing

https://www.theaustralian.com.au/national-affairs/newspoll