What Sydney’s latest lockdown restrictions mean for first-time buyers about to purchase their home

Public auctions and open homes will be banned in Sydney this weekend as part of an even stricter lockdown.

With Australia’s biggest city recording 44 new cases, Health Minister Brad Hazzard declared the traditional Saturday morning bidding in the backyard would be off.

‘Certainly in greater Sydney, there are no open houses for real estate,’ he said.

‘There are no auctions in a physical sense.’

While online auctions will still be taking place, CommSec senior economist Ryan Felsmans said clearance rates were likely to temporarily fall as sellers withdrew their homes from the market during the lockdown.

After restrictions eased, he predicted Sydney’s prices would rise again, making life even harder for potential first-home buyers.

‘We’ve seen this with consumer behaviour during the pandemic, whenever there’s  lockdown, pent-up demand is usually in place and we see a relief rally,’ he told Daily Mail Australia.

‘The strong property market more broadly in Sydney should resume once those restrictions are eased.’ 

Going by Melbourne’s early August to late October lockdown last year, CoreLogic’s head of research for Australia Eliza Owen said Sydney was likely to see a price surge after the lockdown ended.

‘Ultimately, the months following lockdowns have not only resulted in a resumption of sales activity, but potentially the additional sales that would have otherwise transacted during lockdown periods,’ she said.

‘This phenomenon was only exacerbated as restrictions eased across Melbourne and Victoria in the final quarter of 2020, as seen in the national sales volumes including Victoria.

‘In the current environment, there is likely to be a jump in sales activity as restrictions ease across Sydney.’

Melbourne house prices have surged every month without fail since the end of its 112-day lockdown in late October.

Since the start of 2021, house prices in the Victorian capital have surged by 11.4 per cent to a shade under $1million – at $929,769, proving that values soar after lockdowns end.

Sydney’s median house price stands at $1.224million, rising by 18.5 per cent during the first six months of 2021. 

Even during the latest lockdown, Sydney’s auction clearance rates have remained strong.

In the week to June 27, the day the lockdown started, 77.5 per cent of homes up for auction sold for more than the reserve price.

Last week, Sydney auction clearance rate fell slightly to 71.6 per cent as public bidding was allowed, putting it behind Melbourne’s 75.9 per cent clearance rate.

The New South Wales government is now banning public auctions for the first time in more than a year, when all the states did this with the first national lockdown of March 2020.

Even before Sydney’s lockdowns, investors were piling back into the Australian property market with landlord buyer numbers climbing 13.3 per cent in May to a six-year high, Australian Bureau of Statistics data for May showed.

Mr Felsman said rising prices had turned off first-home buyers and the Sydney lockdown would be unlikely to change this.

In May property newcomers made up just under a third, or 32.7 per cent, of owner-occupier mortgages, by value. 

‘It appears as though demand for loans from those first-home buyers has peaked,’ Mr Felsman said.

‘Over the course of the last couple of months, we have seen lending to first-home buyers start to ease and the reason for that, quite simply, is the fact affordability constraints are preventing those first-home buyers from getting on the property ladder.’ 

CoreLogic data showed sales volumes since the start of 2021 had been ‘extremely elevated’ compared with the five-year average. 

In 2017, the Australian Prudential Regulation Authority tightened rules on interest-only and investor loans when more foreigners were buying property.

This time, the investors are Australians, including many rich expats who have returned home.