Homeowners in Sydney and Melbourne are racing to put properties on the market, suggesting they believe the peak of the housing cycle has passed. The surge in listings marks a significant shift after years of chronic supply shortages that drove prices higher.
New property listings rose 16.7 per cent in Melbourne and 8.4 per cent in Sydney over the 28 days to March 8, compared to the same period last year, according to Cotality data. In contrast, Perth saw listings fall by 13.9 per cent as the property boom in that market continued.
The flood of new supply comes at a critical moment. Dwelling values in Sydney and Melbourne have stalled over the past month, with both cities showing signs that the rapid growth of previous years may be ending. Gerard Burg, head of research at Cotality, said vendors may be acting on a calculation that the time to sell is now.
"We've seen home values at a peak in both Sydney and Melbourne, on a quarterly basis, just start to edge a bit lower. It may be some vendors sitting on the sidelines waiting for a bit more certainty about where the market is heading, may be drawn in now thinking, 'we've hit the peak this cycle, values are likely to come off a little as demand conditions weaken, so maybe now is the time to try and sell'."
The change reflects a fundamental rebalancing. Supply and demand in Sydney and Melbourne were returning to more normal trends, compared to last year when demand was stronger than supply, which pushed home values higher. When supply and demand move closer together, there is less upward pressure on prices.
However, researchers have taken a more pessimistic view of the outlook. SQM Research revised its forecasts to warn that dwelling prices in Sydney and Melbourne are likely to fall this year, with Sydney forecast to fall between 2 per cent and 6 per cent, and Melbourne between 1 per cent and 4 per cent. The revised forecast represents a sharp downgrade from earlier predictions of price gains.
SQM's outlook assumed the cash rate would rise to 4.35 per cent by mid-year and inflation would peak at 4.4 per cent to 5 per cent in the June quarter. If interest rates rise higher and inflation continues to accelerate, price falls would be steeper.
The regional divergence is stark. Perth's price forecast was trimmed to 10 per cent to 13 per cent for the year, and Brisbane's was cut to 7 per cent to 11 per cent, reflecting differences in how each market responds to economic conditions.
Despite the gloomy outlook for Sydney and Melbourne, the supply picture remains constrained. Burg said even if there was a little more supply than last year, the supply picture was still relatively tight, which would probably limit any downside risk to home values. New housing construction remains difficult due to high building costs, meaning existing homes coming to market cannot be easily replaced.
There is strong competition at the lower end of the market, with first home buyers, investors and subsequent buyers competing across this sector, helping to support values in the affordable segment even as the broader market cools.
The shift in vendor behaviour reflects a rational response to changed circumstances. When prices peak and momentum stalls, waiting carries risk. Sellers who act while the market is still accepting offers may do better than those who delay hoping for recovery. That logic is now dawning on property owners across Australia's two largest cities, and the surge in listings is the result.