While the Reserve Bank noted in its latest meeting that conditions in the established housing market “remained mixed”, pointing to recent falls in dwelling values across Australia’s capital cities.

“Housing prices in some larger cities had declined in June, though were only a little below recent peaks in the case of Sydney and Melbourne,” the RBA noted.

“Housing prices in a number of smaller cities were broadly unchanged.”

According to Macquarie University’s professor of business analytics Stefan Trueck property prices in May 2020 sold on average 8 per cent below their valuation. This means that in May, houses were being offered at a significant discount to those pre the COVID-19 crisis.

“It is likely that Sydney house prices have already dropped more substantially than the public has been led to believe,” says Professor Trueck. “Vendors and real estate agents have significantly reduced the reporting of sales results for houses and apartments in many suburbs.”

The professor argues there is little doubt that with rising unemployment, a recession, renewed lockdown efforts and lower migration, downward pressure will remain on the property market.

“Property markets are typically much slower to react to economic shocks, but many experts suggest that house prices will actually fall quite significantly over the next 12 months,” he said.

“However, there seems to be a price disconnect between what the official property data is saying about recent home sales and the underlying state of the market. It is likely that Sydney house prices have already dropped more substantially than the public has been led to believe.”.

Drop in reporting of results 

Figures sourced from realestate.com.au show that the average number of reported auction results was 76 per cent in the October to November 2019 period. But since April 2020, only 50 per cent of sales data is being made public. 

The figures show that in comparison to the second half of 2019, auction results or sales are now far less likely to be revealed.

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“For example, in the northern Sydney suburb of Lane Cove, about 60 properties have been sold since the beginning of May 2020, according to realestate.com.au. However, prices for less than 10 of those sales have been made public. This scenario plays out across many other suburbs in Sydney,” the professor highlighted.

By comparing actual sales prices from successful auctions against their estimated prices from valuation models, market watchers are able to gain a better understanding of the true state of the Sydney property market.

What is the actual state of the market?

According to Professor Trueck, his findings show an 8 per cent drop in the housing market.

The withholding of auction results often occurs when vendors or real estate agents are not pleased with the result and the sale price falls below expectations.

Although these transaction prices can be withheld initially, in subsequent weeks the auction prices are eventually made public when they are reported to the NSW Land Registry Services.

“This suggests that typically unfavourable price outcomes are more likely to not be reported by vendors or real estate agents,” Professor Trueck noted.