The Smartline Report – February Edition

The month in review: Sydney

By Herron Todd White
February 2015

2014 was a year that provided continued strong growth across a wide sector of the Sydney market, with record breaking sales and blink and you’ll miss it marketing periods. We believe that 2015 will continue this trend to some degree but not at the rates seen previously, with the key factors being strength of demand and volume of supply.

Opportunities below $1 million
Below the $1 million mark, we believe that a focus on low maintenance dwellings and units will continue due to an ageing population wanting to downsize and time-poor owners desiring not to have large blocks to maintain. This is evident with new estates on the fringes of Sydney metro providing blocks starting from 200 square metres, particularly evident in newly released community planned estates in the south-west growth corridor including Leppington and in the north-west growth corridor in Marsden Park.

Areas to keep an eye on are suburbs surrounding Parramatta which will continue to be developed as Sydney’s second CBD. Strong and continued investment is planned in Parramatta over the next decade with the surrounding suburbs set to also enjoy the benefits of this investment. Examples of this include Westmead for units, as they provide a lower entry point than a similar product in adjoining Parramatta while having a close proximity to the CBD and strong infrastructure with the hospital precinct and rail and bus interchange. Adjoining the CBD to the east, Harris Park which is within walking distance of Parramatta infrastructure, is dominated by low rise 1970s units that are ripe for renovation.

Suburbs to look out for in 2014 will be Penrith and Seven Hills. These and their adjoining suburbs are established suburbs with typical single residential development that have lower entry points and limited stock available. Benefits include proximity to established transport hubs, employment and shopping facilities.

With our crystal ball in hand we believe the western Sydney property market in 2015 will continue to grow but not at the rates seen in the past 12 to 18 months with property professionals keeping a close eye on interest rates, consumer confidence and supply levels.

$1 million to $3 million
2014 was a year of high growth particularly in areas in the north-west of Sydney such as Castle Hill, Cherrybrook, North Rocks and Carlingford. House prices in the $900,000 to $1 million plus market saw above average levels of growth. This was mostly due to the low interest rates, increased demand, a lack of supply and the actual commencement of the much anticipated North West rail link. The question remains of how sustainable this growth in values will be. We believe these suburbs will continue to be popular with families as they have the fundamentals of quality local schools, new transport hubs and established shopping precincts. Australian Property Monitors indicates that the median house price for Cherrybrook is $980,000. We believe this will rise to in excess of $1 million in 2015.

Opportunities exist within established areas. For example, a new estate to be known as Shearwater Landing at Greenhills Beach is soon to be released with vacant lots expected to sell for between $1 million and $2 million. Given the scarcity of new land releases in the Sutherland Shire, the close proximity to Cronulla beaches and cafes and the strong sales results of completed homes in the adjacent estate, the demand for these properties is expected to be very strong. A number of beachfront reserve lots in the estate are expected to be so highly sought after that they are to be sold by auction.

Another section of the Sydney property market that could see an increase in demand this year is lifestyle acreage on the fringes of the metropolitan area.

Traditional acreage locations are planned in some locations for urban consolidation and this in turn has pushed that sector of the market that wants the lifestyle of acreage living further afield. The Hawkesbury and Camden regions in particular are considered to be locations that will benefit from urban sprawl in the nearby growth zones. The Hawkesbury has the added attraction of the river and with planned upgrades to the Richmond and
Windsor bridge crossings, the appeal to purchasers will strengthen. Quality residences with facilities for horses, sheds and arable land are still available for $1 million to $2 million.

Prestige Residential $3 million plus The prestige residential market in Sydney is generally considered to comprise those properties with values in excess of $3 million. These properties tend to be located within the eastern suburbs and eastern beaches, lower and upper North Shore and northern beaches, and include some waterfront localities in the southern suburbs and the larger rural residential estates to the north-west of Sydney.

Traditional prestige residential localities across the Sydney metropolitan area showed an increase in transaction activity during early to mid 2014, with some weakening in sales volume towards the end of 2014.

Given that there has been some gathering momentum in transaction volumes in this market sector with a corresponding reduction in stock levels and an array of super prestige trophy homes transacting, we expect 2015 to show a maintained cautious optimism and confidence in the prestige market and further tempered recovery.

With possible further weakening of the Australian dollar and the possibility of additional interest rate cuts, there may be increased demand from overseas purchasers, including expat purchasers, and further interest from local high net worth buyers.

We feel that the $3 million to $5 million end of the prestige market has strong appeal to those purchasers seeking to trade up into the prestige market and should perform well in 2015, buoyed by low interest rates and the possibility of further interest rate cuts, as well as the ongoing strength and demand in the traditional residential market sub $3 million.

Prestige apartments in the CBD may be subject to further competition in 2015 from a number of developments to be sold off the plan, although further strengthening in the empty nester market may offset any impact of this increased level of competition.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325