Sydney September 2018

The month in review: Sydney

By Herron Todd White
September 2018

Sydney Spring time in Sydney is traditionally a busy time of year in the residential real estate market. Many locations and properties become more appealing during the spring time as the weather warms up and the days become longer.

Apart from general market sentiment and media attention, some of the other reasons that market activity increases around spring can be due to properties presenting nicely with more sunlight, gardens and lawns at their best and potential buyers generally more likely to get out and about after a winter hibernation.

While beach, harbour and river side locations become more attractive at this time of year to both buyers and renters looking to get in before summer, Sydney generally sees increased activity right across the board.

Sydney

For western Sydney the warmer months present an ideal time to list your house for sale. Houses in western Sydney generally have larger sized parcels with considerable gardens and in many cases swimming pools. The warmer months are the best time to sell as the gardens begin to bloom and the weather warms up making swimming pools and outdoor entertaining areas appealing features for Christmas and the summer months.

The graph below shows the total number of listings on the market across Sydney over the past six years, with the spring months often the strongest when it comes to properties available for sale, particularly in October and November.

Sydney property 2

Whilst the amount of stock on the market remained at high levels throughout winter this year, there are still expectations that this spring will still see an uplift in listings. A recent Domain article outlined how spring is likely to come early this year as vendors look to get in before prices ease any further, with many hoping to sell prior to the 1 October long weekend.

As at 12 August, CoreLogic was reporting that the number of new listings is down 8.1% on this time last year, however the number of total listings is up 21.1%, with the median time on the market increasing from 32 days to 46 days over that period. With stock levels at close to six-year highs, a further jump in new listings is likely to provide buyers with even more choice in what is already considered a buyer’s market.

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The wider Sydney market reached its peak in 2017 and is now experiencing weakening values, with some areas falling more quickly than others. Sydney regions held nine of the top ten positions for capital city dwelling value falls over the 2017/18 financial year. Auction clearance rates are now in the 50% range whereas 12 months ago they were above 70%. The marketing profile has also changed in many locations as listed properties are now hitting the market with a private treaty price guide rather than an auction price guide.

Sydney property 4

The inner west and city fringe areas have been interesting to follow over the past six to twelve months. Generally investor stock, new units and secondary properties (e.g. those impacted by very close proximity to busy roads or new infrastructure development) have performed poorly, at least in comparison to previous years, with many of these property types experiencing slight value declines at all value levels.

Many quality properties in desirable areas (e.g. Surry Hills terrace homes or two to three bedroom inner east units with views and good natural light) have seen prices holding steady but buyer interest waning, with many agents noting fewer potential buyers coming through open homes, a single interested party or selling a day prior to auction so as to avoid passing in.

Apartment values in investor driven markets and new unit hot-spots (such as around Green Square, Pyrmont and Chippendale) have also been in decline over the past six months, mainly due to investor lending restrictions and a strong supply pipeline.

Local agents advise that units are the softest sector of the market in the eastern suburbs. In particular the $900,000 to $1.5 million range has seen reduced buyer demand and a softening in prices. This is largely as a result of tighter lending restrictions which have impacted on the amount of money people can borrow, particularly investors.

There is also still demand for good quality stock on the northern beaches. Most homes, given the correct pricing, are still selling relatively quickly. According to the Sydney Morning Herald, the northern beaches was the best performing region at auction on the weekend of 11 August with 82% of properties selling under the hammer. This is believed to be a result of vendors lowering reserve prices to meet current market expectations.

Properties above $5 million in traditional prestige locations have been holding up better than other sub markets over the past 12 months, with a number of record sales in some suburbs and regions, including a sale of almost $11 million in Kangaroo Point in July in Sydney’s south and the $29 million sale of James Packer’s property in Bondi Beach in August.

The latter well-known property of 362 square metres on a corner allotment, comprises a four level luxury home with a ground floor retail/mixed use area, situated on busy Campbell Parade, directly opposite Bondi Beach. The property was previously briefly listed in 2015 with the highest offer at that time being $21.5 million.

Sydney property 5

The prestige trophy home market on the Northern Beaches has also bucked the general market trend. Two recent examples indicate the underlying strength of the market, including 44 Bower Street, Manly which sold for more than $13 million after a four week marketing campaign, while 3 Pavilion Street has recently set the Queenscliff record, selling for $12 million after just four days on the market.

Sydney property 6

The prestige market in the affluent suburb of Mosman has continued to show its strength and resilience. So far this year there have been around ten recorded genuine market sales over $10 million in the suburb (source: Pricefinder.com.au). To reiterate the strength of this prestige market, the suburb record for Mosman was broken this year with a property on Hopetoun Avenue reportedly having sold for around $25 million in July (Domain.com.au). The record Mosman unit sale price has also been broken with 1/2e Mosman Street selling for $10.22 million in April.

The number of high value sales and broken sales records clearly show that, despite the withdrawal of Chinese buyers, there are quality local buyers in this sector who still have confidence in the market. We expect this trend to stabilise throughout the remainder of the year and don’t anticipate any large decrease in values. There are signs however that an increasing level of stock in some prestige markets is beginning to see prices weaken.

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Rental properties in beachside locations are often more highly sought after during spring as tenants look to secure a property before summer. This can be seen in the graph below for the postcode which covers Cronulla, a beachside suburb in Sydney’s south. Although rental prices tend to fluctuate throughout the year, there is a clear increase each year between July and January for both houses and units.

Sydney property 8

Manly, a beachside suburb on Sydney’s northern beaches, also highlights this seasonal demand from a rental perspective with the spring period of 2017 seeing an average of 430 visits to realestate.com.au per unit listing, in comparison to July of 2018 with an average of 287 visits per listing. With rental vacancy rates starting to rise it will be interesting to see if spring this year provides the usual strong uplift in rental demand in these areas.

Overall, we believe spring will see the wider market correction continue to play out. While in recent years spring has seen the majority of properties snapped up quickly, and at strong prices, the added supply to the market this spring is likely to put further downward pressure on prices. High quality properties are still likely to achieve solid results but secondary properties with defects or less desirable features will continue to struggle with vendors needing to have realistic expectations to meet the market. On the other side of this, it provides extra opportunity for buyers, which is certainly welcomed after the highly competitive property market of previous years.

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