Sydney April 2017

The month in review: Sydney

By Herron Todd White
April 2017

Greater Sydney has been a hot market for the past few years, mostly due to a sustained period of low interest rates, demand outstripping supply in most areas, overseas buyers entering the market, tax incentives, media interest, and an increase in values in the entry level pushing up the middle and upper level of the market. These issues combined have caused a wave of interest resulting in a market that hasn’t been this hot for decades.

Within the geographical centre of Sydney, we’ve noted some very popular suburbs. One of these is Oatlands, a quiet suburb within close proximity of the evolving Parramatta CBD, providing large blocks of land, some backing onto a quality golf course. Substantially renovated dwellings are common in many streets. Don’t be fooled by the median house price of $1.37 million (realestate.com); the real action starts from $2 million, with substantial knockdown rebuilds being constructed for owner occupation and a recent record sale of $5.65 million. The buyer profile for this area is cashed-up families wanting a house to substantially renovate close to quality schools and a growing CBD.

In the northern beaches and surrounds, the suburb of Frenchs Forest has been white hot in the past 12 to 18 months as the construction of the much-anticipated Northern Beaches Hospital and surrounding infrastructure is nearing completion. This investment in the area has driven up demand for housing with strong sales occurring. Currently the median value for dwellings is $1.515 million, whereas not so long ago in March 2014 it was $966,500 (CoreLogic).

Running off the back of Infrastructure and hot suburbs we note the suburbs along the north-west rail link have outperformed surrounding suburbs recently, mostly down to this infrastructure investment. Suburbs such as Cherrybrook, Castle Hill and out to Rouse Hill have all benefited from the higher level of demand in wanting to locate near solid transport hubs.

For units, we’ve found the best-performing suburbs to be Mosman and Cremorne. Local agents have identified a sweet spot for 2-bedroom units of between $900,000 and $1.2 million. This will get you a larger, older-style unit appealing to a wider market segment. This price bracket is well suited to a professional couple wanting a low-maintenance unit within close proximity of the city. The problem is the lack of stock driving up demand (and prices) further.

In the outer western suburbs of Sydney, we have seen strong interest in suburbs such as Richmond and Hobartville. With older ex-defence housing, it’s an affordable alternative as the median is $602,500 for Hobartville and $660,000 for Richmond according to realestate.com. For that you can get a 550-square metre block with a partly renovated dwelling within close proximity of Western Sydney University’s Hawkesbury campus, TAFE, Richmond RAAF airbase and the train station. Many buyers have been attracted to this area due to the lower entry point and facilities provided.

In the south-west, Harrington Park is seen as the go-to place. Large blocks, quality dwellings and sought-after common facilities are the main features. The suburb provides a median house price of $855,000, which is above surrounding suburbs such as Gregory Hills at $720,000 (CoreLogic). Whilst the median is $855,000, the really sought after properties start from $1.15 million plus. Buyers in this price bracket are mostly families from the local area wanting an upgrade to a quality modern home and a larger block.

Overall in the last few years, greater Sydney has seen huge demand resulting in prices in all areas skyrocketing. This is the result of a perfect storm of variables surrounding the demand and supply of property. The question of sustainability is a valid concern as prices have continued to rise, getting to the point of unaffordability for many people. The reality is that buyers will be priced out further and further, resulting in demand rising for suburbs in the middle and outer rings of Sydney. Whilst predictions of a slower rate of growth for 2017 are widely accepted by most property professionals, if demand continues to remain strong and supply is still limited then prices will continue to rise. The only thing that will cause a sharp change to these conditions is outside intervention affecting either the supply or the demand for property.

Eastern Suburbs
The eastern suburbs have continued to define the meaning of a hot, hot, hot property market. Although the east has been hot across the board, we consider the $2 million to $3 million price bracket for houses and $1 million to $1.5 million price bracket for units to be the strongest price points in the current market. Paddington has been a stand-out suburb for houses with a 2016 median price of $2.125 million, which is up 21.4% from 2015 (source: PriceFinder). Paddington is a highly regarded suburb close to Sydney’s CBD and comprises mainly period-style terrace homes. The high performing Paddington market has recently been driven by high-quality renovations of terrace-style housing, which is popular with the owner-occupier market, mainly professional couples and small families. An example of such a property is 2 Olive Street, Paddington, which sold on 11 March 2017 for $2.46 million. This property is a typical Paddington terrace comprising 3-bedroom and 1-bathroom accommodation with no car accommodation and is situated on 101 square metres of land.

The home at 2 Olive Street is classified as being architect-redesigned and features a high-quality renovation, exactly what the market demands, resulting in a very strong sale price. With Paddington being such a highly desirable location and having a limited supply of stock, we expect to see recent strong sales prices sustained and predict continued strong growth in the short to medium term.

Within the eastern suburbs unit market, the suburb of Coogee has been a stand-out performer, especially in the $1 million to $1.5 million price bracket. The 2016 median price for Coogee units was $1,037,500 which is up 17.9% from 2015 (source: PriceFinder). As an example of what this median unit price will get you, 7/3-7 Kidman Street, Coogee recently sold for $1.125 million. This property was a near original 1970s unit comprising 2-bedrooms and 1-bathroom with a 1-car lock-up garage and features restricted ocean views. This market is driven by both investors and owner-occupiers, which comprise a mixture of singles, couples and downsizers. The desirable beachside location has always been a main driver for the Coogee unit market and with limited new unit development in the area, we expect to see the trend of strong growth continue.

The prestige market in the eastern suburbs is continuing to see strong sale results. As expected, the main drivers of this prestige market are blue-ribbon suburbs close to the city within popular lifestyle neighbourhoods, close proximity to private schools and with view corridors of the ocean or Sydney Harbour. Demand is still extremely strong for high quality renovated homes and units with cashed-up and time-poor buyers ready to move on the right property, without wanting to do the hard work themselves. A recent example is 84 Paddington Street, Paddington, which recently sold on 8 March 2017 for $7.1 million. This property comprises a 5-bedroom, 3-bathroom Victorian terrace with parking for three vehicles and is situated on 191 square metres of land. The property was previously sold on 6 March 2013 for $2.8 million prior to renovation. This continued strong demand and limited supply of prestige property will keep prices strong in the short to medium term.

Inner West
The inner west has continued to defy expectations with the market going from strength to strength across all suburbs. Auction results continue to hover between 85% and 90% with the continued lack of stock now being the main driver. The strongest growth has been for houses in the $2 million to $4 million price bracket and although growth has slowed for units, the $1 million to $1.5 million price bracket has been the strongest. The suburb of Rozelle has seen some of the strongest growth across the inner west with a 2016 median house price of $1.577 million, up 13.5% from 2015 (source: PriceFinder). Rozelle has always been a highly sought-after suburb and demand is driven by proximity to the CBD, excellent bus services, the café culture and excellent schools. Rozelle comprises a mixture of property styles, with period-style homes traditionally in the highest demand. As with many period-style homes in the inner western suburbs, high-quality renovations and well-designed extensions tend to achieve premium prices. An example of this is 202 Evans Streets, Rozelle, which sold on 10 February 2017 for $3 million.

This circa 1900s property is situated on a 251-square metre allotment and has been renovated and extended, comprising 4-bedroom, 2-bathroom accommodation with a single lock-up garage. The main demand for this price point in Rozelle is from the owner-occupier market rather than the investor, as owner-occupiers see greater opportunity with dated or dilapidated properties in need of renovation. Although we expect houses in Rozelle to see continued growth, we predict it to be more subdued than the previous three years.

South – St George
The St George area is also continuing its strong growth period with hottest price points for houses generally being $1 million to $2 million and $660,000 to $700,000 for units. For houses, the suburb of Oatley has been a very strong performer, having a 2016 median house price of $1.602 million, up 14.5% from 2015 (source: PriceFinder). This strong growth in Oatley is mainly driven by locality, with its villagelike feel and well positioned homes on comparatively large blocks of land, many with good water views. An example of a typical Oatley sale within this strong price point is 3 Gungah Bay Road, which sold on 4 January 2017 for $1.7 million. This property comprised a dated but well-maintained, 2-storey, 5-bedroom, 4-bathroom residence with double garage on 765 square metres of land.

Oatley is also within close proximity of Hurstville, which provides a high level of amenities and good public transport infrastructure. The main buyer profiles within the suburb are owner-occupiers, predominantly families, with minimal investor demand. With Oatley being relatively affordable compared to some surrounding suburbs and strong owner-occupier demand, we expect to see sustained and continued growth in this market.

In generalising the St George area, we recognise that there is still strong demand for the fixer-upper; however, there is a growing trend towards completed contemporary dwellings. Buyers are currently prepared to pay a premium for the privilege of being the first to occupy a residence and will part with their hard-earned cash when they know they are getting the very latest inclusions and high-quality finishes. This reflects the time-poor position of many families who work long hours and want to come home to a modern home rather than doing it themselves. Generally, these houses will provide good levels of accommodation (four to six bedrooms), home automation, high-quality finishes and appliances and multi-vehicle garaging (four to six cars). The strongest results for this style of property are being found in the $2.5 million to $5 million range. This is mainly being driven by overseas buyers, expats and locally based professionals. There could be a softening in this end of the market depending on interest rates, lending policies and exchange rates and overseas market conditions; however, this is seen as unlikely in the short to medium term.

When analysing the unit market, Brighton Le Sands gets a notable mention as a strong performer with a 2016 median unit price of $680,500, up 4.7% from 2015. In a running theme, location has been the main driver of this market, being within close proximity of the beach, an increasingly popular restaurant and café scene and good bus services. With many 1970s, walk-up style unit complexes within the suburb, it attracts investors and owner-occupiers alike. A recent sale of a typical unit was 10/32-34 Queens Road, which sold on 24 February 2017 for $675,000. This was a mainly original 1970s unit located on the top floor with 2 -bedrooms, 1-bathroom and a 1 -car garage. Potential for new transport links and hubs within the vicinity of Brighton Le Sands is expected to drive strong growth in the short to medium term.

 

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