Sydney

The Smartline Report – May Edition

The month in review: Sydney

By Herron Todd White
May 2015

The prestige residential market in Sydney for both units and houses is generally defined as properties with values in excess of $3 million.

Prestige properties tend to be located either within the eastern suburbs and eastern beaches, lower and upper North Shore, northern beaches, some waterfront localities in the southern suburbs and the larger rural residential estates to the north-west of Sydney.

We would consider this is reflective of a general perception that the bottom of this market has been reached, combined with improvements in the share market, the implementation of the Significant Investor Visa and cheaper Australian dollar. Confidence in the prestige market is slowly reemerging with moderate signs of a market recovery.

While we note the official cash interest rate was reduced to 2.25% in February 2015, a new record low, we consider interest movements have less impact on prestige residential market performance. More significant drivers of the prestige market include the state of the equities market, stability in global economic conditions, levels of business and consumer confidence and overall business conditions and the value of the Australian dollar.

Over the past six to eight months, the market for prestige dwellings has shown early signs of strengthening, with increased sales activity and selling agents indicating ongoing strengthening in demand. Combined with the impact of the weakened Australian dollar, there appears to be early signs of market strengthening flowing into the prestige apartment market.

Market activity for 2015 is yet to reach the records of 2014. Recent reported high profile sales include: Villa Del Mare, 63 to 67 Wolseley Road, Point Piper sold in October 2014 for $39 million by Julia Ross to a Chinese businessman after around three years on the market. This near 1,500 square metre non-waterfront site improved with a 6-bedroom, 8-bathroom high calibre Mediterranean style home featuring expansive harbour and CBD views and car accommodation for eight cars, was recently the focus of Treasurer Joe Hockey, when he reportedly announced in March of this year that this purchase was in contravention of the current foreign ownership laws and announced the forced sale of the property. An update of the outcome of that action is yet to be reported.

112 Wolseley Road, Point Piper sold in June 2014 for $37 million. This near 783 square metre absolute harbour front site is improved with a high calibre recently redesigned contemporary home providing 5-bedroom, 7-bathroom accommodation with parking for four cars. Featuring expansive harbour and CBD views with grounds including a private jetty, this home was sold by the accused murderer Ron Medich and was originally listed for sale in 2011 for $55 million.

Prestige Units

Prestige units tend to be located within the eastern suburbs and eastern beaches, lower North Shore and CBD and fringe CBD locations. Demand for premium apartments is largely driven by overseas buyers and empty nesters seeking to downsize from the family home which is typically also from within recognised prestige locations.

With the weakness in the prestige dwelling market during post GFC and up until early 2013, these empty nesters had been unable to secure a premium price for their existing prestige homes and there was a subsequent reduced demand in the prestige apartment market. Demand from overseas investors for off the plan property that complies with overseas investor requirements and a general recovery has seen an improvement in the prices achieved for prestige units.

Highlights of this market include the sale of a penthouse in Elizabeth Street with north views over St Mary’s to the park and the main harbour, with four bedrooms, five bathrooms, private pool, terraces and four car accommodation at $12,365,000 in late 2014.

Greater Sydney

Prestige property in greater Sydney is found traditionally to the north-west in the Hills District.

We have seen some record sales for rural lifestyle properties in suburbs such as Glenhaven, Dural and Kenthurst where acreage allotments allow the construction of large high quality dwellings with resort style ancillary improvements including fully arable acres, tennis court, pools and outdoor kitchens and in some cases horse facilities or ancillary workshops.

These lifestyle buyers are generally from the local suburban districts are are looking to upsize but stay close to familiar services and schools. Lower finance costs and a strong demand for single dwellings allows the buyer the opportunity to upgrade.

As an example there have been in excess of ten sales of acreage properties in Dural in the past 12 months in excess of $3,500,000 and three reported sales in Castle Hill in excess of $3 million of substantial dwellings on parcels up to 2,200 square metres in 2015 alone.

Of particular interest is the $9 million sale of a substantial size dwelling in adjoining Glenhaven on a rural lifestyle block in late 2014. This fully furnished property complete with 1.9 hectares of fully landscaped grounds, indoor pool and three levels of accommodation has set a record for the region and shows an improvement in the demand for this scale of property with the previous recorded sale of this home being $5,300,000 in early 2011 with minimal updates to the property since.

To the south-west, those looking for prestige property are generally looking within the Denham Court and Mount Vernon localities with the prestige market in this region considered in excess of $2 million. Offering similar scale improvements to that found in the Hills district, these areas are within easy commute to the M7 and in demand from the surrounding market looking to upgrade locally.

Research indicates there have been three sales in Denham Court over $2 million since September 2014 of one hectare (2.5 acre) holdings. Nearby Mount Vernon has seen three sales in the Capitol Hill estate greater than $2 million and two vacant land holdings in the estate have achieved over $1.1 million (all on one hectare holdings) in the previous 12 months.

Summary

The Sydney prestige residential market, while highly visible and widely reported by the media, does not generally provide any significant indicator as to the state of the general residential market, with the two markets moving in different cycles and influenced by different drivers.

While we consider the general residential market and the prestige residential market have limited influence on each other, we do consider that emerging levels of confidence in the prestige market, such as increasing transaction numbers (including increasing number of trophy home sales) do provide a level of perceived comfort and underlying confidence to the overall state of the overall Sydney residential market.

Given 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 would expect that 2015 should show a maintained cautious optimism and confidence in the prestige market and further tempered recovery.

With possible further weakening in the Australian dollar and the possibility of additional interest rate cuts (generally impacting the lower end of the prestige residential market), there may be scope for increased demand from overseas purchasers (including expat purchasers) and further interest from local high net worth buyers.

The remainder of 2015 could be an interesting year and we will be watching to see what record tumbles and where.

www.smartline.com.au

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

 

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