Sydney home listings hit 17-year high, Melbourne reaches 12-year peak as buyers gain power

The number of homes being put up for sale has hit a stunning 17-year high in Sydney and a 12-year peak in Melbourne – despite tanking clearance rates, rocketing auction withdrawal rates and stalling price growth.

The supply surge revealed by the latest Domain Market Insights Report comes as sellers grow alarmed by softening prices and seek to sell before they drop, while others face real cost-of-living hardship and investors rethink their financial strategies.

At the same time, buyers are increasingly sitting back and evaluating their options as the FOMO bubble slowly deflates amid all the extra choice.

Domain chief residential economist Dr Nicola Powell says we’re steadily moving into a buyers’ market.

“We’re starting to see a real shift in the market, both in how sellers are behaving and how buyers are responding,” she says. “Listing activity is seasonally strong for this time of year, which suggests some sellers are bringing their homes to market earlier, likely to get ahead of a further slowdown in price.

“Meanwhile, buyers aren’t moving with the same urgency because they’re more cautious, have more choice, and are taking longer to commit. We’re already seeing this shift in buyer behaviour reflected in the data, with softer clearance rates, and more properties being withdrawn as sellers adjust expectations.”

The new report shows that, in Sydney, total supply in May increased for the fifth consecutive month to its highest level since 2009, with the number of houses on the market up 25.2 per cent on last year, and 9.4 per cent on the previous month. Melbourne’s total supply is at its greatest since 2014, with its number of houses on the market rising 15.9 per cent over the last year, and 9.5 per cent on the previous month.

At the same time, auction clearance rates across all capital cities fell to 54.7 per cent, the lowest May result since 2019, with 16.5 per cent of homes offered at auction withdrawn, the highest since April 2020.

Discounting is at an eight-month high in Sydney, and a nine-month high in Melbourne.

“The uptick of supply on the market is the result of a whole combination of things which is like death by a thousand cuts,” says Doug Driscoll, the chief executive of Starr Partners agency, which mostly operates in Western Sydney. “Owners have had three rate rises this year, with the expectation of more to come, and that’s had a big impact.

“We’re also in a cost-of-living crisis that’s starting to bite, and some investors are thinking it’s not worth the hassle of holding onto property after the budget and maybe now’s a good time to sell because they fear prices will drop. Some people are panicking, which is always the worst thing to do.”

Buyers have also been spooked by rising costs, the war in the Middle East, rising petrol prices and low confidence, Driscoll believes, so they’re doing nothing, waiting to see how the market will play out.

“People are looking like deer in the headlights, but it’s now definitely become a buyers’ market and a good time to act,” he says.

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In Melbourne, Jeremy Fox of RT Edgar agrees. “I think everyone is very nervous about the changes to capital gains tax [CGT] and negative gearing, and they’re reorganising their finances,” he says. “If you’ve had an investment property for a long time, then you might as well sell and put the money into something else.

“But we are seeing buyers sitting on their hands, with a lot of properties around for a long period of time. Everyone is very cautious. For both buyers and sellers, there were a lot of things in the budget to digest, with CGT, negative gearing and trusts, and we don’t know what’s going to happen with interest rates. It’s put a lot of shock all at once into the system.”

Brisbane is reacting similarly, with record May listings, a five-year high in total supply, and clearance rates dropping to their lowest May level since 2019.

In regional Australia, the market is softening even more quickly, with clearance rates plummeting to 43 per cent, also the lowest May level in six years.

“Many of those areas saw very strong growth during the pandemic, and now we’re seeing demand normalise, particularly as affordability pressures continue to build,” Powell says.

“Overall, we’re moving through a clear inflection point. Supply is rebuilding, buyers are regaining some power, and that sense of urgency that defined the market over the past few years is starting to ease.”

John Bongiorno of Marshall White says seasonal influences are also boosting supply, as a final autumn burst before the school holidays. “The King’s birthday long weekend is always busy,” he says.

Even in Sydney’s wealthiest areas, people have been affected by rising costs and interest rate hikes, says Vicki Laing of Laing Real Estate. “I was talking to a dentist in Paddington, who says customers are now putting off coming in for a clean and check-up. People are hurting.”