Market Report - New South Wales (May 2008)

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With many investors and first homebuyers still treating Sydney real estate with extreme caution, now might be the time for a bold move into the nation’s largest city.
 
Home to over 4.2m people (according to Australian Bureau of Statistics data), Sydney is Australia’s largest residential market. However, as Andrew Donnelly, CEO of Braxton Chase, points out, it is probably better described as three markets – the lower tier, the middle tier and the prestige market. And they are on different paths.
 
“Stagnation in the lower end of the Sydney market continues to hinder growth, and the interest rate bogeyman has done little to stimulate things along,” says Donnelly. “It’s inaccurate to suggest that overall market growth is underway, as only the upper and middle-upper echelons are performing well, while the lower-end market continues to find its footing.”
 
According to Residex, the median price for a house in Sydney is now $586,500, an increase of 1.26% in the three months to January 2008 and an 8.65% increase year on year. These figures, which represent the slowest growth of any Australian city except Perth, mask the fact that Sydney’s prestige market is growing stronger by the week.
 
Median rents for houses are at $450 a week, easily the highest in Australia. The average yield on a house is 4.01%.
 
“While many of the fundamentals are in place for a broad market turnaround, the big gusts required to fill the sails of property growth remain offshore, swirling, building, waiting,” says Donnelly.
 
“With rising interest rates, first homebuyers and investors are still congregating on the sidelines, sizing things up. On the bright side, the recent share market shake-up will probably see a lot of stock investors re-evaluate and shift funds into property.”
 
Units have seen very little real price growth since the end of the 2003 boom, Donnelly adds, which has led in many instances to Sydney units being more affordable than those in other capital cities. Residex figures show units at a median price of $401,000 – a 6.97% increase over 12 months and a 2.38% increase over three months. Unit rents are again the most expensive in Australia at $385 per week.

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