Do you remember what happened to property markets during the first year of the pandemic?

Well, in 2020, amidst a variety of commentators wrongly calling the mother of property busts on the horizon, most sellers and plenty of buyers decided to wait it out.

There was a lot of fear and uncertainty back then, for sure, because we were heading into the unknown from a health, economic, and property market perspective.

A sense of déjà vu

While our nation has experienced economic shocks before – the GFC started in 2008 for example – generally humans behave in the same way time and time again until a clearer picture emerges on what the heck is happening.

What usually occurs when there is an economic upheaval ahead is that central banks start to radically reduce cash rates, which flows on to lower mortgage repayments for property owners which, in turn, helps to support the economy. 

We saw this in action in 2008 when the RBA slashed the cash rate from 7.25 per cent (it’s currently 3.35 per cent FYI) down to 3 per cent in less than a year because of the economic fallout of the GFC.

Apart from a few tweaks here and there, the cash rate stayed historically low for more than 12 years – until the start of 2022.

However, in times of economic turmoil, property owners generally decide to ride it out where possible and that generally means they don’t list their properties for sale in great volumes.

We certainly saw this in 2020 and even into 2021, when the total number of property listings around the nation remained much lower than is traditionally the case.

Of course, after the RBA cut the cash rate to nearly zero to support the economy once again, we also started to see strong property price growth – partially due to the low volume of property listings – which spurred on many a seller in 2021 and into 2022.

But here’s the thing: once interest rates started to rise, there were fewer buyers on the ground, which motivated many sellers to do nothing at all – perhaps spooked by the softer market conditions in some locations and nine cash rate rises in nine meetings.

And in a circular kind of way, this reduction in property listings is again going to underpin prices in the months ahead.

Low listings under way

According to SQM Research, national residential property listings fell again over January – down by 5.8 per cent to 215,155 properties from the 228,415 recorded in December last year.

Sydney recorded a decline in listings of 7.9 per cent, while Canberra and Melbourne also recorded sharp declines of 7.1 per cent and 8.3 per cent respectively. Listings in Adelaide fell by nearly eight per cent in a month to be a similar level over the past year. Only Hobart recorded a rise for the month of 0.3 per cent.
Nationally, new listings of less than 30 days fell a further 19.6 per cent over January 2023 to 42,409 properties on the market.

This count represented the fifth lowest count of new listings for any month since SQM commenced monitoring the national listings market way back in 2009, which was the first full year of the GFC.

I suppose what I’m trying to convey is that much of the market movement at present has happened before because humans generally behave in similar ways whenever there is economic or interest rate uncertainty.

Plus, our robust banking sector means that our nation generally does not have a huge cohort of mortgage holders with properties they simply can’t afford like happened in the USA (that GFC and sub-prime mortgage crisis reference once again).

We appear to be nearing the peak of inflation and the rising interest rate cycle and with property listings remaining low, then my money is on brighter property days by the second half of this year because we have been down this property road before.