By Herron Todd White
As we approach the halfway point of 2019, it’s interesting to look back at the first half of the year to see how the Sydney market has performed. The first half of 2019 confronted a unique set of circumstances in that both a state and federal election were held. This has provided a further brake on the Sydney property market, particularly in the case of the federal election with the property at the forefront of the campaign given the negative gearing and capital gains tax changes proposed.
In general, auction rates have improved on the back of vendor expectations meeting the market, the number of property transactions is down compared to 2018 and price declines have been slowing but are still down 4.3% from the start of the year to mid-May. There has been an 11.2% decline over the past 12 months (source: CoreLogic).
There have been mixed results across Sydney however with different areas performing better than others. The tables below show the five best and five worst performing Sydney regions in regard to change in dwelling values. Median prices in the Blue Mountains and upper northern beaches showed greater resilience over the past 12 months while Epping and southern Sydney appear to have experienced the greatest falls.
House prices still appear to be falling at a faster rate than units, with the Sydney median house price down 3.1% in the March quarter to $1,027,962. This compares to the Sydney median unit price which is down 2% in the March quarter to $696,935 (source: Domain).
A likely interest rate cut, an increased appetite for new loans by major lenders and more certainty after the elections are likely to see market conditions continuing to improve in the second half of the year, with prices beginning to stabilise.
Western Sydney Property Updates
As the half time whistle sounds for 2019 and the oranges are passed around, it provides an opportunity to see how the market is tracking.
In Western Sydney, the overall trend for dwellings is still weakening, after a number of years of positive growth. Negative sentiment in the marketplace and tighter lending requirements have played a part in these falling median prices. We predict this trend will continue for the rest of the year.
Houses in Erskine Park are 4% lower than December 2018 according to their median price statistics. Marsden Park had similar figures with a 3.6% drop, whilst Oran Park has seen only a 1% drop in dwelling median values since December 2018 (Source: realestate.com.au).
Our experience with residential units and off the plan sales has found premiums were paid in stronger markets for the then new product. As the wider market weakens, we are continuing to see settlement valuations not meeting the off the plan purchase price. These valuations require recent resales of similar units to support the value and in many areas, the evidence is unable to support the strong off the plan prices.
An example includes a recent resale in Parramatta. Selling for $1.285 million off the plan in May 2015, this three-bedroom unit recently resold for $990,000 representing a 30% drop in value since purchase. This is not an uncommon occurrence with many units sold for a premium off the plan in a stronger market now unable to meet their initial purchase price up to four years later.
There are signs in the marketplace that buyers for new units are harder to attract and a number of incentives are now being offered. A recent example is the Pelican Estate in Schofields, a 270 unit development selling off the plan in western Sydney. The developers Bathla are giving away $1.2 million in prizes to lucky purchasers with a $500,000 first prize, $200,000 second prize and a further $500,000 in prizes. Incentives and giveaways such as this are not typically seen during a booming market and are considered a sign of the times.
Speak with a Parramatta Mortgage Broker today.
Lower North Shore Property Updates
The Lower North Shore, often a unique market, can fluctuate either way in a hurry. Last year as the general property market started to weaken, this region was quite resilient and we were still seeing some very positive results. This was especially true in the prestige section of the market with higher value properties outperforming the rest of the market and with a record number of sales. Now almost halfway through 2019, we take stock of which direction this market is headed.
The affluent suburb of Mosman, the most well-known suburb on the lower north shore, is often the best indicator of where the market currently stands. The most recent statistical data sourced from realestate.com.au, indicates a median house price for April 2019 of $3,782,500. Comparing this price to the median from December 2018, indicated at $3.9 million, we see an obvious weakening trend. It would appear that this time around, Mosman is following the trend of the general market cycle.
The prestige sector of Mosman, having experienced a booming few years, also seems to have significantly quietened. Researching the number of transactions that have occurred over $5 million in Mosman so far in 2019, it appears that there have only been three such transactions in the suburb (source: RP Data) and none over $10 million. This is in contrast to 2018 where we saw a total of 85 sales over $5 million for the year, 34 of those between January and May. Local selling agents have indicated that there has certainly been a decline in activity over $5 million, however quality properties are still attracting plenty of interest from genuine buyers.
The unit sector of Mosman usually performs very well and in line with the dwelling market. With all the talk of over-supply in the form of high-density development, Mosman is partly immune from this issue. There has been limited high-density unit development in Mosman, with most new strata properties being targeted at downsizers. This product is more likely to be lower density and higher quality, aimed at those looking for a low maintenance lifestyle. The most recent statistical data sourced from realestate.com.au indicates a median unit price for April 2019 of $980,000. Comparing this price to the median from December 2018, indicated at $1.03 million, we again see a weakening trend, generally in line with the dwelling market declines being experienced in Mosman.
The second half of 2019 will be extremely interesting as we see what direction the market on the lower north shore takes.
Market activity has generally been subdued within inner Sydney over the past six months. Prices have continued to decline in all but the bluest of blue chip areas.
Within the CBD itself, unit prices have been declining since 2017, largely due to continued supply and decreasing investor demand. Realestate.com.au shows a decline in the median unit sale price for the suburb of Sydney from $950,000 in January 2019 to $925,000 in March 2019, after a peak of $1.1 million in 2017.
The perennially oversupplied Green Square area of Sydney (covering parts of Zetland, Alexandria and Waterloo) has also fared badly with median prices falling from $900,000 in January 2019 to $875,000 (according to realestate.com.au) in March 2019 alone, after a 2017 peak of $955,000. Furthermore, the strong supply pipeline is set to continue throughout the next eighteen months, with multiple new developments due for settlement, all at a time when investor demand is decreasing.
Median house prices have also been decreasing since the start of the year with inner suburbs on the western side of the CBD such as Forest Lodge declining from a median of $1.5 million in January 2019 to $1.39 million at the end of the first quarter of 2019. Realestate.com.au indicates that the median price there peaked at $1.78 million in 2017.
On the eastern side of the CBD, the diminutions have been less severe, with Paddington decreasing from an overall market cycle peak of $2.34 million at the start of 2019 to $2.27 million in March 2019 according to realestate.com.au.
The inner city has a multitude of property types and price points. The price point seeing the most value retention in the current market appears to be affordable one and two-bedroom units within suburbs along the city’s eastern fringe, particularly those more suited to owner-occupiers – those in well-finished buildings, boutique or well-regarded complexes, with views and parking being particularly sought after.
According to realestate.com.au, units in Potts Point have remained generally stable in price since the start of 2019, with medians of $785,000 in January 2019 and $778,000 in March 2019.
There have been some weaker results for two-bedroom units in trendy Surry Hills. For example 507/437 Bourke Street, a two-bedroom warehouse conversion sold for $1.6 million in April 2019 after being purchased for $1.655 million in April 2016.
Furthermore, 36/45-49 Holt Street, a semi-modern two-bedroom unit within 500 metres walk of Central Station sold for $1.002 million in March 2019, previously selling for $1.1 million in June 2016.
Speak with an Inner Sydney Mortgage Broker today.
According to Corelogic, Sydney has six of the ten sub-regions which have shown the largest decline in dwelling values in the year to April. Two of those are in Sydney’s south with the Sutherland and inner south-west (St George and Bankstown) areas showing 12.2% and 14.9% decline in dwelling values in the 12 months to April.
The Bass Hill/Georges Hall (-19.4%), Panania/ Milperra/Picnic Point (-18.9%) and Revesby (-18.5%) regions appear to have experienced the biggest declines during this period (source: CoreLogic). These suburbs continued to experience declines in their median house prices during the first quarter of 2019 of between 1.2% (Picnic Point) and 5.6% (Revesby), with only Milperra bucking the trend with a slight 0.5% increase in its median house price (source: realestate.com.au).
In the Sutherland Shire, Miranda/Yowie Bay has been listed as one of the poorer performing regions in Sydney with a median drop of 17.8% in the 12 months to April (source: CoreLogic).
Miranda has had a recent increase of units flooding the market with a few large unit developments reaching completion this quarter. Real estate agents have noted that this has also affected the rental market with a larger number of units all available for rent at the same time.
Not all suburbs and property types are seeing a decline, however. The Cronulla housing market has remained stable for the March quarter at $2.25 million. The unit market, however, has dropped from a median price of $900,000 in December 2019 to $875,000 in March 2019 (source: realestate.com.au).
Speak with a Southern Sydney Mortgage Broker today.
Eastern Suburbs Property Updates
The eastern suburbs peaked a little later than the general Sydney market, however, declines have now caught up with the greater Sydney market, with an 11% fall in the 12 months to April (source: CoreLogic).
At the lower end of the housing market, a recent sale in Botany of a 1900s, three-bedroom, one-bathroom semi-detached dwelling for $900,000 was more than 30% lower than when it sold for $1.3 million in August 2017. The median house price in Botany was down 3.5% in the March quarter to $1.45 million, while the median unit price was down 2.4% over this time to $810,000 (source: realestate.com.au).
The eastern suburbs prestige residential market was more resilient than the wider market in 2018 although there are definite signs that the market has peaked as well. The prestige suburb of Rose Bay experienced a 3.4% decline in its median house price in the March quarter to $3,646,500. Units fell even quicker with the median price down to $1,155,000, a drop of 7.6% over the quarter (source: realestate.com.au).
This doesn’t appear to be uniform across all suburbs though, with Bellevue Hill (0.8%) and Vaucluse (7.2%) showing increases in their median house prices during the March quarter. Despite this, activity in these suburbs has definitely eased with only 13 sales above $5 million in Bellevue Hill as at mid-May compared to 64 for all of 2018. Vaucluse has had ten sales compared to 65 for all of 2018 (source: PriceFinder).
With some economic concerns both at home and abroad, the prestige market may be a little more volatile as we head into the second half of the year.
Speak with an Eastern Suburbs Mortgage Broker today.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.