Sydney and NSW
June 2015 Market Update Region by Region
Overview
Taking time to assess ‘where you’re at’ is a valuable use of your minutes. By pausing and evaluating what’s happened in the past, you’re often more prepared to tackle the hurdles ahead. This month we’ve used the excuse of June’s mid-year position to reflect upon the first half of 2015 in property markets. Each of our offices has handed in their scorecard on how real estate is performing in their area, and the results are compelling.
Sydney
In the first quarter of 2015 we have seen the market continually grow from 2014, astonishing even some of the most optimistic of followers. We are seeing strong activity throughout all levels of the market and this is especially evident below $2 million.
With interest rates at a record low there have been no brakes and activity has remained strong. We have seen record highs of auction clearance in the first quarter of 2015 with the clearance rate averaging 80% in May from around 50% in January. Record numbers of properties appear to be going to auction instead of private treaty to capitalise on the demand/ supply ratio. Analysts have predicted that interest rates will remain the same until 2016 or even 2017, so we may see the market continue this way or even possibly strengthen over the next 18 month period.
Given the range of property and value bands within the Sydney metropolitan area we felt it worthwhile to summarise as follows:
PRESTIGE PROPERTY MARKET IN SYDNEY
The prestige residential market in Sydney for both units and houses is generally considered to comprise properties with values in excess of $3 million.
Prestige houses tend to be located either within the eastern suburbs and eastern beaches, lower and upper North Shore, northern beaches, with some waterfront localities in the southern suburbs and the larger rural residential estates to the north-west of Sydney.
Prestige units tend to be located within the eastern suburbs and eastern beaches, lower North Shore and CBD and fringe CBD locations.
Over the past 12 months, the prestige market has shown very early signs of market recovery with an evident minor increase in both buyer interest and transaction activity.
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 re- emerging, with moderate signs of a market recovery.
While we note the official cash interest rate was reduced to a new record low of 2% in May 2015, we consider interest movements have reduced
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.
Demand for premium apartments is largely driven by overseas buyers and empty nesters seeking to downsize from the family home. With weakness in the prestige dwelling market post GFC and up until early 2013, these empty nesters had been unable to secure a premium price for their existing homes and there was a subsequent reduced demand flow-on into the prestige apartment market.
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 flow-through strengthening into the prestige apartment market.
The Sydney prestige residential market, while highly visible and reported upon widely by the media, does not generally provide any significant indicator as to the state of the general residential market, with both markets moving in different cycles and influenced by different drivers.
While we consider the general residential market and the prestige residential market to have limited influence on each other, we do consider that emerging levels of confidence in the prestige market, including increasing transaction numbers (and an increasing number of trophy home sales), do provide a level of perceived comfort and underlying confidence to the 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 wealth buyers.
Recent reported high profile sales include:
Villa Del Mare, 63 to 67 Wolseley Road, Point Piper was 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-water front 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.
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 reported accused murderer Ron Medich and was originally listed for sale in 2011 for $55 million.
PRESTIGE LIFESTYLE PROPERTIES
At the other end of the prestige scale on the fringes of the greater metropolitan area is that section of the market that is looking at lifestyle acreage parcels. This prestige end paints the picture of improved market certainty, lifestyle buyers looking to up size in the confidence of a secure housing market with lower finance costs and improved market activity at the price point below. Buyers particularly in North West Sydney are happy to up size onto lifestyle sized acreage holdings as they are able to utilise familiar services and amenities.
Currently lower interest rates are bringing up sizers into the market place who are happy to capitalise on record low interest rates and bracket creep in the suburbs.
Money spent on infrastructure projects is helping to bring the fringe closer to suburbia. This is giving lifestyle buyers security in the knowledge that services are coming and they won’t feel isolated from usual inner suburban amenities and facilities and transport including the North West Rail Link, South West Rail Link and expansion of major arterial road links (Camden Valley Way, M5 duplication).
While interest rates remain low, prices at the level below continue improving and the sector above in all likelihood will follow suit. Buyers at the end of the year will look a little further afield into their next ring to find some value for money.
A snapshot of recent market activity within this sub- market:
- Dural has had a minimum of ten sales exceed $3.5 million since July 2014 (two hectare holdings with substantial dwellings and ancillary improvements).
- Denham Court in the south west has seen three sales over $2 million since September 2014 (one hectare holdings with large scale dwellings and associated ancillary improvements).
- Mount Vernon has seen three improved sales in the Capitol Hill estate exceed $2 million and two vacant land holdings in this estate achieve over $1.1 million (all on one hectare holdings).
- 71 Patterson Lane, Grose Vale achieved a new record price of $2.3 million for the prestigious Patterson’s Road community estate to the north of Richmond (2.9 hectare holding). This shows that buyers are looking a little further afield than the traditional acreage districts.
WESTERN SYDNEY
The Western Sydney residential market is full steam ahead with no signs of slowing down as we draw in on the half-way point of 2015. This strong market is no surprise to many, as inner ring suburbs have priced many families, first time buyers and investors out of the market.
This strong market in the past six months is a result of perceived affordability, low interest rates and improved infrastructure such as the South West Rail Link, proposed North West Rail Link and further development of the West Growth Areas.
A common theme is that agents have limited stock and strong demand with property selling at record prices. This has resulted in more properties being sold via auction to maximise the selling potential in this strong market.
The sub $500,000 class predominantly comprises older style units, particularly in areas such as Liverpool and Fairfield which are both strong regional centres in the south west that have seen significant gains in the past 12 months. Properties that in early 2014 were at the low $300,000 market are now up to the $400,000 range.
Examples of this include:
Hamilton Road, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a dated fit-out recently sold in April for $390,100;
The Horsley Drive, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a renovated fit-out recently sold in April for $415,000;
The sub $800,000 is the largest portion of the housing market in the south west and in the past six months has been driven by families and investors due to the low interest rates and affordability.
Examples of this include:
Hinchinbrook: A 1990s single level, 4-bedroom 2-bathroom dwelling with 2-car garage was sold in March 2014 for $620,500. The same dwelling was recently re-sold with the same agency for $737,000 with no significant work being completed. This represents approximately 12% growth in a 12 month period.
Northmead: A 2000s 2-level, 3-bedroom, 2-bathroom townhouse with 2-car garage sold in August 2013 for $630,000 and has recently re-sold in February 2015 for $750,000. This represents approximately 18% growth.
Hughes Avenue, Ermington; A 2000 built single level, 3-bedroom villa which sold for $500,000 in 2013 recently re-sold for $800,000 in the same original condition. Records show that it took 13 years to go from an original purchase price of $300,000 to $500,000).
HILLS DISTRICT
The Hills are alive with the sound of a new railway line under construction and the commencement of this project has seen significant demand within all submarkets along its new route.
Kellyville has grown up from the stigma of McMansions World in the early 2000s. It offers a wide variety of schools, churches, playing fields,
modern shopping centres and access to the adjoining Norwest Business Park. There has been significant demand from families for the classic 4-bedroom, 3-bathroom, double storey project home which will shortly also be on a major transport line.
Since April 2015 there have nine agent advised sales in Kellyville alone ranging from $1,260,000 to $1,650,000 on parcels ranging from 393 square metres to 1000 square metres. Castle Hill has long been the regional centre of the Hills District and offers a substantial commercial centre, light industrial park and a range of family based facilities. Several train stations are planned throughout the suburb with units adjoining the town centre particularly seeing a benefit.
Widespread media attention was recently focused on a proposed large scale residential unit development which on completion in two years will see several towers with some 20 plus levels completed. Located opposite the proposed station and on the fringe of the shopping centre, sales in the first weekend of release exceeded $150 million.
Also benefitting from a station on the proposed train line is Cherrybrook which just hit a new record with a $2.2 million dollar sale of a Meadowbank home with an inground pool and quality fittings. Perusal of RPData records shows some 26 sales over $1.5 million in this suburb since the start of 2015.
NORTHERN BEACHES
Developers are buying large parcels of land in the semi rural suburb of Ingleside in Sydney’s Northern Beaches. Pittwater Council, in partnership with Urban Growth and led by the Department of Planning and Infrastructure, has established the Ingleside precinct project plan to rezone large sections of the suburb to make way for up to 2500 homes, sporting fields and two new schools.
CBD FRINGE/INNER WEST
We feel that the CBD and city fringe may be one of the strongest markets as the locality has a lot to offer, having regular transport, a shopping
precinct, work opportunities as well as hospitals and universities. One of the most popular products in the Sydney CBD area is new units off the plan. We are seeing dated contract prices at which we now believe to be below market value. By the time these units are ready for completion, they will have seen substantial increases from the original purchase price. The strongest performers in this sub market are 2-bedroom units with parking. A unit without parking does not appear to be getting the same growth as one with parking.
Units selling off the plan around the CBD are selling in record time and achieving record prices.
This market is particularly attractive to overseas investors who are able to purchase new properties, and local downsizers looking to secure a new product.
SOUTHERN SUBURBS
As in most suburbs we have a seen a strong market of owner occupiers, investors and developers in the southern suburbs. The market is predominantly stronger under the $2 million market with the market above $3 million remaining stable. We have seen some big results with one of the most popular products and achieving record sale prices being sites with potential development of either a duplex or triplex. The most popular price point would have to be the million dollar mark which is now the starting price for a dated house in the southern suburbs, although there is still a lot of semi modern units in the mid $600,000 range. In speaking with local agents there appears to be a lack of stock in all price brackets but a strong demand. We have not yet seen any signs of the market slowing.
Where will we be this time next year? And what will be the catalyst for a change in market confidence? Only time will tell.
Canberra
Near record low interest rates and low unemployment levels have resulted in continued strength in the ACT economy and property market, particularly the residential sector. Despite market uncertainty in the lead up to the September 2013 Federal election and the subsequent restructuring and downsizing of the Australian public service in late 2013 and early 2014, the ACT property market and broader economy have remained resilient.
The impact of Mr Fluffy asbestos contaminated homes and the eventual removal of these properties from the market will have a positive effect on the broader ACT economy. Accordingly, demand for residential property is set to increase. Given current stock levels both for sale and rent, softening dwelling commencement numbers and increased demand levels we anticipate the residential market in the ACT to tighten over the short term with prices to firm. Small segments of the market including units along the Flemington Road corridor in Gungahlin are expected to remain soft plus those properties situated in less sought after locations or providing inferior accommodation.
In the 2015 March quarter, Herron Todd White research shows the median prices for standard housing and medium density housing at $560,000 and $410,0000 respectively. A total of 1,908 sales were recorded in this quarter which is considered to be slightly below normal quarterly sales numbers with the long term average at circa 2,070 recorded sales.
Illawarra
The Illawarra residential property market has continued its strong growth through 2014 to date. Local real estate agents advise that they are experiencing one of the best first six months in over a decade with many properties selling above reserve or asking price. Record low interest rates combined with a limited supply of properties on the market have contributed to this.
Both the bottom end and top end of the market are seeing capital growth. Units, houses and rural properties are all selling. Auctions are the flavour of the day and if this method doesn’t suit the vendor, marketing is generally on the basis of “offers over ...” as it is increasingly difficult for agents to price properties in this buoyant market.
As in other sectors, we are seeing prices in new residential unit complexes in Wollongong and vacant parcels of land in the new estates of Shell Cove, Flinders and Brooks Reach Horsley also showing appreciable rises in the past 12 months.
Many of the new unit complexes are selling off the plan even before any construction has begun. Investors are keen to purchase new units as a result of low interest rates while also benefiting from government incentives. First home buyers are snapping up vacant parcels in these new land estates and also benefiting from low interest rates and government incentives. Overall the fierce competition between investors and first home buyers, combined with the low interest rates and the limited supply of properties on the market, is driving prices upward. Sydney buyers are entering the market more and more as they are driven out by the hot-house prices of Sydney.
Although confidence is still high in the market as it was at the beginning of the year, from our conversations with both vendors and purchasers sentiment is that the current level of market activity is bound to slow down soon. Some local agents and valuers are predicting the market to ease towards the end of the year, despite interest rates remaining low.
Supply in all areas is increasing as tends to occur when confidence is high and this tends to regulate prices. This will result in more properties on the market, longer selling periods and auction clearance rates declining.
The areas that have seen the most growth are generally those where buyers and lenders should be most cautious. Some areas south of Wollongong have experienced a substantial increase in value over the past 18 to 24 months for instance and may be pegged back in any price correction scenario. As always the top end will be the most susceptible to any slowing in the market. Another sector that has suffered in the past when things go awry is the beach house. Buyers offloading the beach house to ensure they can keep up the mortgage payments on the principal residence is a situation we have seen before in this coastal region.
Unemployment is still high in the region with talk that both extractive and manufacturing sectors have some redundancies to go. This will also affect confidence and impact on prices.
Southern Highlands
The Southern Highlands residential property market has seen a marked increase in activity in both volume and price over the past twelve months. There has been a noticeable increase in activity by investors; interestingly, rental levels are steady to slightly increasing. The increasing price trend is very strong at the lower end of the market, up to $800,000. Properties in the up to $1.5 million price bracket are also trading more briskly.
There has been good land sales activity in the now established residential subdivision precincts such as Renwick Estate (Mittagong), Bingara Gorge (Wilton) and more recently smaller more affordable lots at Darraby Estate (Moss Vale). This uptick in activity has seen the emergence of residential infill developments in the townships of Bowral and Mittagong, with established larger land lots being subdivided into smaller allotments which are keenly sought after. New construction activity has also been evident, most commonly project style homes within these new residential estates. There has also been renovation/extension activity in the well located, older style and character homes within the townships of Bowral and Mittagong. The increase in prices has been at a steady rate and not as a spike in pricing, so we consider these increases to be sustainable and should continue over the next twelve months. The upper end of the market has bottomed, albeit there is still some caution evident, but we are now starting to see an increase.
Southern Tablelands
The Southern Tablelands region is steady. Goulburn has seen steady to increasing trends over the past five years and has now plateaued. There have been good land sales in the new, modern residential estates in Goulburn, including the Belmore Estate, Merino Country Estate and Mistful Park Estate. There is good construction activity of new homes being built. The market in Crookwell is also steady.
The rural residential property market (two to 100 hectares in land size) is steady throughout the Tablelands.
Newcastle
Autumn is over and winter is fast approaching if recent storms are anything to go by. What does this mean for the Hunter region and its property market? The yearly halfway mark is not far off and house prices are still increasing. According to RPData, over the past year we have seen a 14.5% increase in house prices within the area. This is a substantial increase over a one year period and we are left wondering when this increase will show signs of slowing.
The Hunter region, being the largest coal producing location in Australia, can become a slave to the price of coal and a small pebble thrown in the world pool of coal prices can have an enormous ripple effect on the local Hunter economy. Coal prices were a significant factor in the Hunter weathering the Global Financial Crisis so well. Lately we have seen the price of coal drop significantly and this has been a damaging element to the Hunter property market, especially within Singleton and surrounding suburbs. House prices within this region are trending downwards at present with no obvious growth prospects on the short term horizon. Driving through suburbs of Singleton supports this contention as most streets have many properties for sale with little or no sold stickers plastered on the sign boards.
The Newcastle market is still on the rise with house prices seemingly ever-increasing especially in inner city suburbs such as Cooks Hill, The Junction, Merewether and Hamilton. The question is what is driving these prices and we think it primarily comes down to location and scarcity of stock. People want to live close to the beach and within the CBD suburbs and with interest rates taking another cut lately, that makes it a lot easier for many families to justify the move to inner city if they can find the right property. That, however, is easier said than done.
Moving away from Newcastle and up north we come to Nelson Bay, which could be described as the Florida of New South Wales. Surrounded by beautiful bays this is the perfect place to retire with many serviced apartments available for occupation as holiday retreats with beautiful views, excellent facilities and handy to all the local amenities.
The property market here shows much stability at present with mortgagee in possession sales seemingly a thing of the past. You can live in a tranquil beautiful serene location and still have the advantage of being close to infrastructure and also less than an hour’s drive to Newcastle.
The Hunter property market could be considered reasonably volatile at present with different drivers being exhibited in different locations, some good and some bad. Given this, investors need to be wary of where they invest, especially out of towners with limited local knowledge. Our advice is to seek local expert information and have a drive around the localities in question. A simple drive around can highlight things of note that are not evident from a sterile sales ad.
NSW Mid North Coast
This month we are having a mid year review looking at how the Mid North Coast has performed so far in 2015.
During the latter part of 2014 we noted increases in residential sales activity and rising values in the larger towns throughout the Mid North Coast region. This trend has continued in the first half of 2015, with the record low interest rates continuing to fuel these markets. These increases have been predominantly in the low to mid range of the residential market with increasing sale rates and slowly increasing values.
The higher value prestige and rural property markets in the region remain relatively slow. There have been more sales numbers but fairly stable prices and there remains a continuing oversupply of product available for sale and limited demand combining to produce generally static values. We expect this to continue for the remainder of the year, with higher value properties and rural residential properties increasing at a slower rate.
Looking at localities:
Port Macquarie has seen sales often occurring at or close to full list price after minimal time on the market which indicates a rising market where potential purchasers do not wish to be left behind.
A lot of this pressure is coming from investors. With a currently very tight rental market and low interest rates, these properties are often positively geared. The rental market has tightened significantly in 2015 due to the infrastructure work underway in and surrounding the town including the Pacific Highway upgrade and the construction of the Charles Sturt University, with rents increasing rapidly and almost no vacancies. This stress on the Port Macquarie market has seen neighbouring areas benefit as purchasers and tenants look to smaller surrounding towns to meet their needs. These areas include Wauchope, Lake Cathie, Bonny Hills and the Camden Haven areas.
Further south, Taree has seen sales rates and values slowly increasing but to a lesser extent than that of the larger regional towns, with rentals up but less demand. After a stagnant market for the past three years, the surrounding areas including Old Bar, Wallabi Point and Harrington are finally seeing improved activity and slowly increasing values. Most of the new estates have seen increased sales of vacant land with increased prices and this is flowing through to the established dwelling market.
Forster and Tuncurry are more closely linked to the Sydney market with a longer lag time due to the large amount of holiday accommodation. But it is starting to pick up as demand has increased and has seen prices start to increase as available stock is depleted. A few higher end units and holiday units (over $500,000) are starting to sell, which is an indication of a rising market and more confidence.
Bathurst/Orange
Only recently in Bathurst an auction of vacant residential allotments in a Council owned subdivision was held where 42 out of the available 57 lots were sold. Demand for new properties remains strong among owner-occupiers and investors alike. Land prices have shown some increases as the availability of potential residential land around Bathurst becomes limited subject to significant investment in services, particularly water.
Numbers at open houses are solid and sales activity remains steady to strong in Bathurst and Orange. The reduction in interest rates has likely helped to maintain values and market activity. These are positive signs at a time when the economy is arguably not performing as well as it could. It is particularly encouraging news for Orange which has stabilised from a peak in 2014 which was due in part to a local mining expansion. Realestate.com is listing 261 properties for rent and 924 for sale in Orange which is indicative of a continuing buyer’s and renter’s market despite the increased activity.
There are also some signs of a two-speed situation with some smaller localities not performing as well. Sales periods in surrounding villages remain longer than average, particularly for properties over $400,000. This is consistent with potential employment concerns developing outside of the major centres which are experiencing the majority of the population growth.
Tamworth
Down down, prices are down. Coles has it right when you refer to the current state of the Upper Hunter property market, in particular Muswellbrook. Due to a downturn in mining activity in the region the market is on the decline after the 2012/2013 financial year peak.
RPData reports 245 residential sales of less than one hectare, between $200,000 and $600,000 in the 2012/2013 financial year. Using the same parameters the 2013/2014 financial year reports 137 sales and the current financial year to date is 48 sales. The decline in the number of sales correlates to the vacancy rate, rents and value.
Based on our internal assessment rents have declined up to 20% and property values up to 12%. Unfortunately the floor of the market has not yet been established with mortgagee in possession sales continuing the decline as investors feel the squeeze from high vacancy rates.
The most hit property type appears to be the new builds on small land areas with small floor plans. Older larger properties appear to be holding their values better.
Data supplied by HTW
June 2015 Market Update Region by Region
Overview
Taking time to assess ‘where you’re at’ is a valuable use of your minutes. By pausing and evaluating what’s happened in the past, you’re often more prepared to tackle the hurdles ahead. This month we’ve used the excuse of June’s mid-year position to reflect upon the first half of 2015 in property markets. Each of our offices has handed in their scorecard on how real estate is performing in their area, and the results are compelling.
Sydney
In the first quarter of 2015 we have seen the market continually grow from 2014, astonishing even some of the most optimistic of followers. We are seeing strong activity throughout all levels of the market and this is especially evident below $2 million.
With interest rates at a record low there have been no brakes and activity has remained strong. We have seen record highs of auction clearance in the first quarter of 2015 with the clearance rate averaging 80% in May from around 50% in January. Record numbers of properties appear to be going to auction instead of private treaty to capitalise on the demand/ supply ratio. Analysts have predicted that interest rates will remain the same until 2016 or even 2017, so we may see the market continue this way or even possibly strengthen over the next 18 month period.
Given the range of property and value bands within the Sydney metropolitan area we felt it worthwhile to summarise as follows:
PRESTIGE PROPERTY MARKET IN SYDNEY
The prestige residential market in Sydney for both units and houses is generally considered to comprise properties with values in excess of $3 million.
Prestige houses tend to be located either within the eastern suburbs and eastern beaches, lower and upper North Shore, northern beaches, with some waterfront localities in the southern suburbs and the larger rural residential estates to the north-west of Sydney.
Prestige units tend to be located within the eastern suburbs and eastern beaches, lower North Shore and CBD and fringe CBD locations.
Over the past 12 months, the prestige market has shown very early signs of market recovery with an evident minor increase in both buyer interest and transaction activity.
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 re- emerging, with moderate signs of a market recovery.
While we note the official cash interest rate was reduced to a new record low of 2% in May 2015, we consider interest movements have reduced
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.
Demand for premium apartments is largely driven by overseas buyers and empty nesters seeking to downsize from the family home. With weakness in the prestige dwelling market post GFC and up until early 2013, these empty nesters had been unable to secure a premium price for their existing homes and there was a subsequent reduced demand flow-on into the prestige apartment market.
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 flow-through strengthening into the prestige apartment market.
The Sydney prestige residential market, while highly visible and reported upon widely by the media, does not generally provide any significant indicator as to the state of the general residential market, with both markets moving in different cycles and influenced by different drivers.
While we consider the general residential market and the prestige residential market to have limited influence on each other, we do consider that emerging levels of confidence in the prestige market, including increasing transaction numbers (and an increasing number of trophy home sales), do provide a level of perceived comfort and underlying confidence to the 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 wealth buyers.
Recent reported high profile sales include:
Villa Del Mare, 63 to 67 Wolseley Road, Point Piper was 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-water front 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.
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 reported accused murderer Ron Medich and was originally listed for sale in 2011 for $55 million.
PRESTIGE LIFESTYLE PROPERTIES
At the other end of the prestige scale on the fringes of the greater metropolitan area is that section of the market that is looking at lifestyle acreage parcels. This prestige end paints the picture of improved market certainty, lifestyle buyers looking to up size in the confidence of a secure housing market with lower finance costs and improved market activity at the price point below. Buyers particularly in North West Sydney are happy to up size onto lifestyle sized acreage holdings as they are able to utilise familiar services and amenities.
Currently lower interest rates are bringing up sizers into the market place who are happy to capitalise on record low interest rates and bracket creep in the suburbs.
Money spent on infrastructure projects is helping to bring the fringe closer to suburbia. This is giving lifestyle buyers security in the knowledge that services are coming and they won’t feel isolated from usual inner suburban amenities and facilities and transport including the North West Rail Link, South West Rail Link and expansion of major arterial road links (Camden Valley Way, M5 duplication).
While interest rates remain low, prices at the level below continue improving and the sector above in all likelihood will follow suit. Buyers at the end of the year will look a little further afield into their next ring to find some value for money.
A snapshot of recent market activity within this sub- market:
- Dural has had a minimum of ten sales exceed $3.5 million since July 2014 (two hectare holdings with substantial dwellings and ancillary improvements).
- Denham Court in the south west has seen three sales over $2 million since September 2014 (one hectare holdings with large scale dwellings and associated ancillary improvements).
- Mount Vernon has seen three improved sales in the Capitol Hill estate exceed $2 million and two vacant land holdings in this estate achieve over $1.1 million (all on one hectare holdings).
- 71 Patterson Lane, Grose Vale achieved a new record price of $2.3 million for the prestigious Patterson’s Road community estate to the north of Richmond (2.9 hectare holding). This shows that buyers are looking a little further afield than the traditional acreage districts.
WESTERN SYDNEY
The Western Sydney residential market is full steam ahead with no signs of slowing down as we draw in on the half-way point of 2015. This strong market is no surprise to many, as inner ring suburbs have priced many families, first time buyers and investors out of the market.
This strong market in the past six months is a result of perceived affordability, low interest rates and improved infrastructure such as the South West Rail Link, proposed North West Rail Link and further development of the West Growth Areas.
A common theme is that agents have limited stock and strong demand with property selling at record prices. This has resulted in more properties being sold via auction to maximise the selling potential in this strong market.
The sub $500,000 class predominantly comprises older style units, particularly in areas such as Liverpool and Fairfield which are both strong regional centres in the south west that have seen significant gains in the past 12 months. Properties that in early 2014 were at the low $300,000 market are now up to the $400,000 range.
Examples of this include:
Hamilton Road, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a dated fit-out recently sold in April for $390,100;
The Horsley Drive, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a renovated fit-out recently sold in April for $415,000;
The sub $800,000 is the largest portion of the housing market in the south west and in the past six months has been driven by families and investors due to the low interest rates and affordability.
Examples of this include:
Hinchinbrook: A 1990s single level, 4-bedroom 2-bathroom dwelling with 2-car garage was sold in March 2014 for $620,500. The same dwelling was recently re-sold with the same agency for $737,000 with no significant work being completed. This represents approximately 12% growth in a 12 month period.
Northmead: A 2000s 2-level, 3-bedroom, 2-bathroom townhouse with 2-car garage sold in August 2013 for $630,000 and has recently re-sold in February 2015 for $750,000. This represents approximately 18% growth.
Hughes Avenue, Ermington; A 2000 built single level, 3-bedroom villa which sold for $500,000 in 2013 recently re-sold for $800,000 in the same original condition. Records show that it took 13 years to go from an original purchase price of $300,000 to $500,000).
HILLS DISTRICT
The Hills are alive with the sound of a new railway line under construction and the commencement of this project has seen significant demand within all submarkets along its new route.
Kellyville has grown up from the stigma of McMansions World in the early 2000s. It offers a wide variety of schools, churches, playing fields,
modern shopping centres and access to the adjoining Norwest Business Park. There has been significant demand from families for the classic 4-bedroom, 3-bathroom, double storey project home which will shortly also be on a major transport line.
Since April 2015 there have nine agent advised sales in Kellyville alone ranging from $1,260,000 to $1,650,000 on parcels ranging from 393 square metres to 1000 square metres. Castle Hill has long been the regional centre of the Hills District and offers a substantial commercial centre, light industrial park and a range of family based facilities. Several train stations are planned throughout the suburb with units adjoining the town centre particularly seeing a benefit.
Widespread media attention was recently focused on a proposed large scale residential unit development which on completion in two years will see several towers with some 20 plus levels completed. Located opposite the proposed station and on the fringe of the shopping centre, sales in the first weekend of release exceeded $150 million.
Also benefitting from a station on the proposed train line is Cherrybrook which just hit a new record with a $2.2 million dollar sale of a Meadowbank home with an inground pool and quality fittings. Perusal of RPData records shows some 26 sales over $1.5 million in this suburb since the start of 2015.
NORTHERN BEACHES
Developers are buying large parcels of land in the semi rural suburb of Ingleside in Sydney’s Northern Beaches. Pittwater Council, in partnership with Urban Growth and led by the Department of Planning and Infrastructure, has established the Ingleside precinct project plan to rezone large sections of the suburb to make way for up to 2500 homes, sporting fields and two new schools.
CBD FRINGE/INNER WEST
We feel that the CBD and city fringe may be one of the strongest markets as the locality has a lot to offer, having regular transport, a shopping
precinct, work opportunities as well as hospitals and universities. One of the most popular products in the Sydney CBD area is new units off the plan. We are seeing dated contract prices at which we now believe to be below market value. By the time these units are ready for completion, they will have seen substantial increases from the original purchase price. The strongest performers in this sub market are 2-bedroom units with parking. A unit without parking does not appear to be getting the same growth as one with parking.
Units selling off the plan around the CBD are selling in record time and achieving record prices.
This market is particularly attractive to overseas investors who are able to purchase new properties, and local downsizers looking to secure a new product.
SOUTHERN SUBURBS
As in most suburbs we have a seen a strong market of owner occupiers, investors and developers in the southern suburbs. The market is predominantly stronger under the $2 million market with the market above $3 million remaining stable. We have seen some big results with one of the most popular products and achieving record sale prices being sites with potential development of either a duplex or triplex. The most popular price point would have to be the million dollar mark which is now the starting price for a dated house in the southern suburbs, although there is still a lot of semi modern units in the mid $600,000 range. In speaking with local agents there appears to be a lack of stock in all price brackets but a strong demand. We have not yet seen any signs of the market slowing.
Where will we be this time next year? And what will be the catalyst for a change in market confidence? Only time will tell.
Canberra
Near record low interest rates and low unemployment levels have resulted in continued strength in the ACT economy and property market, particularly the residential sector. Despite market uncertainty in the lead up to the September 2013 Federal election and the subsequent restructuring and downsizing of the Australian public service in late 2013 and early 2014, the ACT property market and broader economy have remained resilient.
The impact of Mr Fluffy asbestos contaminated homes and the eventual removal of these properties from the market will have a positive effect on the broader ACT economy. Accordingly, demand for residential property is set to increase. Given current stock levels both for sale and rent, softening dwelling commencement numbers and increased demand levels we anticipate the residential market in the ACT to tighten over the short term with prices to firm. Small segments of the market including units along the Flemington Road corridor in Gungahlin are expected to remain soft plus those properties situated in less sought after locations or providing inferior accommodation.
In the 2015 March quarter, Herron Todd White research shows the median prices for standard housing and medium density housing at $560,000 and $410,0000 respectively. A total of 1,908 sales were recorded in this quarter which is considered to be slightly below normal quarterly sales numbers with the long term average at circa 2,070 recorded sales.
Illawarra
The Illawarra residential property market has continued its strong growth through 2014 to date. Local real estate agents advise that they are experiencing one of the best first six months in over a decade with many properties selling above reserve or asking price. Record low interest rates combined with a limited supply of properties on the market have contributed to this.
Both the bottom end and top end of the market are seeing capital growth. Units, houses and rural properties are all selling. Auctions are the flavour of the day and if this method doesn’t suit the vendor, marketing is generally on the basis of “offers over ...” as it is increasingly difficult for agents to price properties in this buoyant market.
As in other sectors, we are seeing prices in new residential unit complexes in Wollongong and vacant parcels of land in the new estates of Shell Cove, Flinders and Brooks Reach Horsley also showing appreciable rises in the past 12 months.
Many of the new unit complexes are selling off the plan even before any construction has begun. Investors are keen to purchase new units as a result of low interest rates while also benefiting from government incentives. First home buyers are snapping up vacant parcels in these new land estates and also benefiting from low interest rates and government incentives. Overall the fierce competition between investors and first home buyers, combined with the low interest rates and the limited supply of properties on the market, is driving prices upward. Sydney buyers are entering the market more and more as they are driven out by the hot-house prices of Sydney.
Although confidence is still high in the market as it was at the beginning of the year, from our conversations with both vendors and purchasers sentiment is that the current level of market activity is bound to slow down soon. Some local agents and valuers are predicting the market to ease towards the end of the year, despite interest rates remaining low.
Supply in all areas is increasing as tends to occur when confidence is high and this tends to regulate prices. This will result in more properties on the market, longer selling periods and auction clearance rates declining.
The areas that have seen the most growth are generally those where buyers and lenders should be most cautious. Some areas south of Wollongong have experienced a substantial increase in value over the past 18 to 24 months for instance and may be pegged back in any price correction scenario. As always the top end will be the most susceptible to any slowing in the market. Another sector that has suffered in the past when things go awry is the beach house. Buyers offloading the beach house to ensure they can keep up the mortgage payments on the principal residence is a situation we have seen before in this coastal region.
Unemployment is still high in the region with talk that both extractive and manufacturing sectors have some redundancies to go. This will also affect confidence and impact on prices.
Southern Highlands
The Southern Highlands residential property market has seen a marked increase in activity in both volume and price over the past twelve months. There has been a noticeable increase in activity by investors; interestingly, rental levels are steady to slightly increasing. The increasing price trend is very strong at the lower end of the market, up to $800,000. Properties in the up to $1.5 million price bracket are also trading more briskly.
There has been good land sales activity in the now established residential subdivision precincts such as Renwick Estate (Mittagong), Bingara Gorge (Wilton) and more recently smaller more affordable lots at Darraby Estate (Moss Vale). This uptick in activity has seen the emergence of residential infill developments in the townships of Bowral and Mittagong, with established larger land lots being subdivided into smaller allotments which are keenly sought after. New construction activity has also been evident, most commonly project style homes within these new residential estates. There has also been renovation/extension activity in the well located, older style and character homes within the townships of Bowral and Mittagong. The increase in prices has been at a steady rate and not as a spike in pricing, so we consider these increases to be sustainable and should continue over the next twelve months. The upper end of the market has bottomed, albeit there is still some caution evident, but we are now starting to see an increase.
Southern Tablelands
The Southern Tablelands region is steady. Goulburn has seen steady to increasing trends over the past five years and has now plateaued. There have been good land sales in the new, modern residential estates in Goulburn, including the Belmore Estate, Merino Country Estate and Mistful Park Estate. There is good construction activity of new homes being built. The market in Crookwell is also steady.
The rural residential property market (two to 100 hectares in land size) is steady throughout the Tablelands.
Newcastle
Autumn is over and winter is fast approaching if recent storms are anything to go by. What does this mean for the Hunter region and its property market? The yearly halfway mark is not far off and house prices are still increasing. According to RPData, over the past year we have seen a 14.5% increase in house prices within the area. This is a substantial increase over a one year period and we are left wondering when this increase will show signs of slowing.
The Hunter region, being the largest coal producing location in Australia, can become a slave to the price of coal and a small pebble thrown in the world pool of coal prices can have an enormous ripple effect on the local Hunter economy. Coal prices were a significant factor in the Hunter weathering the Global Financial Crisis so well. Lately we have seen the price of coal drop significantly and this has been a damaging element to the Hunter property market, especially within Singleton and surrounding suburbs. House prices within this region are trending downwards at present with no obvious growth prospects on the short term horizon. Driving through suburbs of Singleton supports this contention as most streets have many properties for sale with little or no sold stickers plastered on the sign boards.
The Newcastle market is still on the rise with house prices seemingly ever-increasing especially in inner city suburbs such as Cooks Hill, The Junction, Merewether and Hamilton. The question is what is driving these prices and we think it primarily comes down to location and scarcity of stock. People want to live close to the beach and within the CBD suburbs and with interest rates taking another cut lately, that makes it a lot easier for many families to justify the move to inner city if they can find the right property. That, however, is easier said than done.
Moving away from Newcastle and up north we come to Nelson Bay, which could be described as the Florida of New South Wales. Surrounded by beautiful bays this is the perfect place to retire with many serviced apartments available for occupation as holiday retreats with beautiful views, excellent facilities and handy to all the local amenities.
The property market here shows much stability at present with mortgagee in possession sales seemingly a thing of the past. You can live in a tranquil beautiful serene location and still have the advantage of being close to infrastructure and also less than an hour’s drive to Newcastle.
The Hunter property market could be considered reasonably volatile at present with different drivers being exhibited in different locations, some good and some bad. Given this, investors need to be wary of where they invest, especially out of towners with limited local knowledge. Our advice is to seek local expert information and have a drive around the localities in question. A simple drive around can highlight things of note that are not evident from a sterile sales ad.
NSW Mid North Coast
This month we are having a mid year review looking at how the Mid North Coast has performed so far in 2015.
During the latter part of 2014 we noted increases in residential sales activity and rising values in the larger towns throughout the Mid North Coast region. This trend has continued in the first half of 2015, with the record low interest rates continuing to fuel these markets. These increases have been predominantly in the low to mid range of the residential market with increasing sale rates and slowly increasing values.
The higher value prestige and rural property markets in the region remain relatively slow. There have been more sales numbers but fairly stable prices and there remains a continuing oversupply of product available for sale and limited demand combining to produce generally static values. We expect this to continue for the remainder of the year, with higher value properties and rural residential properties increasing at a slower rate.
Looking at localities:
Port Macquarie has seen sales often occurring at or close to full list price after minimal time on the market which indicates a rising market where potential purchasers do not wish to be left behind.
A lot of this pressure is coming from investors. With a currently very tight rental market and low interest rates, these properties are often positively geared. The rental market has tightened significantly in 2015 due to the infrastructure work underway in and surrounding the town including the Pacific Highway upgrade and the construction of the Charles Sturt University, with rents increasing rapidly and almost no vacancies. This stress on the Port Macquarie market has seen neighbouring areas benefit as purchasers and tenants look to smaller surrounding towns to meet their needs. These areas include Wauchope, Lake Cathie, Bonny Hills and the Camden Haven areas.
Further south, Taree has seen sales rates and values slowly increasing but to a lesser extent than that of the larger regional towns, with rentals up but less demand. After a stagnant market for the past three years, the surrounding areas including Old Bar, Wallabi Point and Harrington are finally seeing improved activity and slowly increasing values. Most of the new estates have seen increased sales of vacant land with increased prices and this is flowing through to the established dwelling market.
Forster and Tuncurry are more closely linked to the Sydney market with a longer lag time due to the large amount of holiday accommodation. But it is starting to pick up as demand has increased and has seen prices start to increase as available stock is depleted. A few higher end units and holiday units (over $500,000) are starting to sell, which is an indication of a rising market and more confidence.
Bathurst/Orange
Only recently in Bathurst an auction of vacant residential allotments in a Council owned subdivision was held where 42 out of the available 57 lots were sold. Demand for new properties remains strong among owner-occupiers and investors alike. Land prices have shown some increases as the availability of potential residential land around Bathurst becomes limited subject to significant investment in services, particularly water.
Numbers at open houses are solid and sales activity remains steady to strong in Bathurst and Orange. The reduction in interest rates has likely helped to maintain values and market activity. These are positive signs at a time when the economy is arguably not performing as well as it could. It is particularly encouraging news for Orange which has stabilised from a peak in 2014 which was due in part to a local mining expansion. Realestate.com is listing 261 properties for rent and 924 for sale in Orange which is indicative of a continuing buyer’s and renter’s market despite the increased activity.
There are also some signs of a two-speed situation with some smaller localities not performing as well. Sales periods in surrounding villages remain longer than average, particularly for properties over $400,000. This is consistent with potential employment concerns developing outside of the major centres which are experiencing the majority of the population growth.
Tamworth
Down down, prices are down. Coles has it right when you refer to the current state of the Upper Hunter property market, in particular Muswellbrook. Due to a downturn in mining activity in the region the market is on the decline after the 2012/2013 financial year peak.
RPData reports 245 residential sales of less than one hectare, between $200,000 and $600,000 in the 2012/2013 financial year. Using the same parameters the 2013/2014 financial year reports 137 sales and the current financial year to date is 48 sales. The decline in the number of sales correlates to the vacancy rate, rents and value.
Based on our internal assessment rents have declined up to 20% and property values up to 12%. Unfortunately the floor of the market has not yet been established with mortgagee in possession sales continuing the decline as investors feel the squeeze from high vacancy rates.
The most hit property type appears to be the new builds on small land areas with small floor plans. Older larger properties appear to be holding their values better.
Data supplied by HTW
