The Smartline Report – October Edition

The month in review: Sydney

By Herron Todd White
October 2015

As the majority of the country is aware, the Sydney market has been going from strength to strength in the past few years and each price point seems to have opportunities. The median price for a dwelling in Sydney is $772,200 which is a growth in value of 16.2% over the previous financial year according to CoreLogic RP Data in June 2015. The driving force for the majority of the Sydney market is supply and demand. With the traditionally strong spring season approaching, the auction clearance rates appear to be slowing but there are significantly more properties being put to auction each week.

To get a better gauge on opportunities in Sydney, we have looked at various value thresholds within the metropolitan area up to $2 million. These are the market levels that have the most activity and appeal to the majority of purchasers.

$350,000 to $550,000
Generally only vacant land in newly released large estates within designated growth zones of the south west and north west corridors is available in this price range. Estates such as Oran Park, Spring Farm, Jordans Springs and Marsden Park would provide an opportunity for those looking to build their first dream home.

Given the extent of infrastructure including light rail networks, the upgrading of local roads for connection to the motorways and the newly designated employment zones within both these growth zones, the opportunities for a solid investment are there for the foreseeable future.

If a purchaser is looking for a unit in this value range opportunities exist within 15 to 20 kilometres of the CBD in suburbs such as Punchbowl and Lakemba for a 1-bedroom unit and further out in the suburbs of say Liverpool or Campbelltown for a 2-bedroom unit. Generally some capital appreciation can be achieved in the short term as properties are typically 1970s, three storey walk up unit buildings that are in original order.

$550,000 to $1 million
A popular price point that is seen to be affordable, suburbs such as Acacia Gardens and Kings Langley (Blacktown), Winston Hills and Greystanes (Parramatta) and Werrington and Cranebrook (Penrith) traditionally offer original or renovated homes built in the 1970s to 1980s, typically on 600 square metre parcels with established local services including schools and links to public transport.

As an example a recent sale in Churchill Drive, Winston Hills shows the appeal of this suburb which is about four kilometres from the Parramatta CBD on the M2 motorway. A typical single level 3-bedroom, 1-bathroom red brick 1970s dwelling on a 700 square metre parcel, the property includes an updated timber kitchen. A local agent reports it sold in August 2015 for $921,000 with minimal changes from the previous sale in September 2013 for $710,000.

Units in this price point can be found throughout the city and the style, condition and location will be factors in the final price. Properties close to shopping centres, universities and transport links are highly appealing to both owner occupiers and tenants.

Some investors have been able to make significant gains by purchasing off plan and settling in a stronger market. Recently completed developments in Camperdown, Homebush, Castle Hill and Westmead have shown significant capital appreciation between the exchange and the settlement dates.

A 3-bedroom, 2-bathroom, 1-car, courtyard apartment on a busy road in Westmead recently sold for $660,000 which is a significant increase from the $535,000 achieved off the plan in October 2013.

With the commencement of the Norwest rail link property that was close to the corridor has seen a significant increase in value and none more so than the suburb of Kellyville. Once a farming community and overshadowed in value by its big sister Castle Hill, residential development started in earnest in the late 1990s and the suburb was seen as the place to build your McMansion.

Vacant land released in the previous few years within two kilometres of the proposed railway line has seen the biggest boom. There are several records of parcels that exchanged off the plan in late 2013 for mid $500,000 and are now achieving high $900,000 as a vacant lot for a single residential dwelling.

$1 million to $2 million
With more than a third of all transactions in Sydney in the year to 30 June selling in excess of $1 million (according to CoreLogic RP Data in August 2015) this is the most popular price range for those already living in Sydney and looking to upgrade. This price range is red hot and offers a variety of styles to suit a multitude of requirements from a fibro shack prime for redevelopment to a fully renovated property ready to move straight into or a recently completed unit. Families looking to upsize have been strong drivers in this price sector.

Inner west suburbs such as Newtown, Erskineville and Dulwich Hill are all still very strong with plenty of sales activity in new unit developments with units starting from around $1 million which have proven to be increasingly sought after. Homes priced between $1 million and $1.5 million within close proximity of infrastructure are attracting a lot of attention. Single level 2-bedroom Victorian terraces (with no parking) and two storey terraces are the main style of dwelling in this price range.

Eastern suburbs such as Bondi, Bondi Junction and Double Bay continued to provide strong auction results for homes and units alike.

Southern suburbs such as Kareela, Como, Engadine Gymea and Sans Souci have been strong. Dual occupancy development sites, modern project homes and renovated older style homes attract most of the attention.

Strong demand for renovated dwellings has attracted strong demand and results as building or renovating has become more challenging with increased building costs, builders becoming increasingly hard to find and the mere convenience of moving into a renovated home. Redevelopments such as dual occupancies and duplexes have become common throughout Sydney as land is becomes harder to find. Large premiums are being paid for the potential to redevelop and create two homes on one lot.

An example of a strong result within the year is a modern 5-bedroom project home in the southern suburb of Como recently selling at auction for an astonishing $1.8 million. This home was previously sold in March 2014 for $1.355 million, so this was a tidy profit. Local agents attribute the increase to the mere convenience of move in and enjoy with absolutely no work required.

The commencement of the Norwest rail link that will connect Rouse Hill to Castle Hill to Cherrybrook to Epping has been the catalyst for significant value increases in the Hills district. With limited public transport options previously, the railway is seen as a major win for the district. Very few homes under $1 million exist in these zones and depending on the suburb will vary in age, overall level of accommodation and standard of fit out.

A neat and tidy, single level, 4-bedroom, 2-bathroom early 2000s dwelling on a 560 square metre parcel has just exchanged in Rouse Hill for $1.052 million. There had been no renovations since the previous sale in August 2012 for $595,000.

Rural lifestyle options
The north west growth zone is focused on a portion of Sydney that was traditionally small acreage lots some 40 kilometres plus from the CBD. The zone has been under review for the best part of ten years and as such developers looking to capitalise on the change in zoning from rural to residential have been land banking for some time. Currently option periods and sunset clauses of 12 to 18 months are finishing and many cashed up vendors are taking their money from the epicentre of the growth zone (Marsden Park, Schofields and Riverstone) and moving to the northerly fringe (Oakville, Maraylya and Pitt Town). These buyers are then able to trade up in house quality and age of dwelling while retaining land size and lifestyle elements.

These vendors have received a sale price in the order of $900,000 to $1.2 million per acre of land for redevelopment purposes and are able to purchase a newer, larger and often better lifestyle home on a similar size parcel that equates to $350,000 and $550,000 per acre. Local agents have reported a strong pool of buyers who are able, willing and ready to buy and are comfortable outlaying multi million prices given they are able to buy (in most cases) without mortgage stress and live in a region with which they are familiar.

Is this rapid price increase going to continue over spring and the new year? Local agents have noticed slightly lower numbers at open homes and many prospective sellers are cautious of selling before they have found a new home for themselves. The lack of stock and high demand continue to be the main driving force for record breaking prices.

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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