After ignoring Sydney for much of the previous 5 years, investors are now back in full force.
Sydney achieved a milestone in the September quarter after median house values broke through the $600,000 mark for the first time according to a Residex data. During the three months through to September, median house values in Sydney jumped by 5.66% to $610,500 - the highest on record. This follows a solid 6.48% gains during the August quarter, which virtually wiped out earlier losses.
"What we"ve seen is that the growth is moving into the middle area of the market. In fact the lower end suburbs have seen small falls because there was a bit of a bubble there which is now subsiding. However this has been more than covered by the rise in value occurring in the middle suburbs. It"s quite strong. Sydney is long overdue for some movement. I think it"s a general movement upwards that is now occurring." says John Lindeman, chief analyst with Residex.
Tim Lawless, national research director with rpdata.com says the current growth rate in Sydney as a whole is unexpected. "We certainly didn"t expect the growth rate would jump that much but it does demonstrate what you call exuberance in the marketplace at the moment. We"re seeing auction clearance rates up at 70% week on week. We"re seeing a lot of activities return to the market, growth in property values and a bounce in confidence not just in Australian economy but also in the property market. In many ways the property market was really the one asset class that led Australia out of the doldrums of 2008," he says.
The unit market also managed to eke out some gains, albeit at a much slower pace compared to its performance during the previous quarter. Median unit values rose by2.32% to $427,000 over the same period.
"The unit performance is not quite as strong as the house market with the growth. It got something to do with the fact that the high affordability has encouraged first homebuyers to go to the housing market than unit. The unit market is now becoming oversupplied as it were with very little growth in it. But I think this will change when interest rate go up and people will return back to the affordable unit market," says Lindeman.
Winners and losers
One area that is currently experiencing oversupply is the blue ribbon district of Lower North Shore, where a lot of new unit developments are underway. "You can see that there is no growth at all over the past three months. During the past 12 months, values actually fell in some areas like Roseville, Cremorne and Turramurra. I say it"s an area that"s been languishing for a while because of oversupply," says Lindeman.
In stark contrast, the low-priced, first homebuyer unit market continued to outperformed the market. "That"s where people go and buy, that"s why we"re seeing solid growth in median unit values in Punchbowl, Fairfield and Cabramatta. Over the past three months these areas have grown by about 5%. I think this will continue and then move into areas such as Mascot and St. Peters which are developing unit market," says Lindeman.
Another segment experiencing robust growth is the premium market. Suburbs such as Paddington, Neutral Bay, North Bondi and Bondi Beach have taken a big hit in 2008, but are now experiencing flurry of activity flowing into these prestige areas. All of these suburbs have grown by more than 6% over the past 3 months according to Lindeman.
"I think the growth is fuelled by confidence returning into the market. I believe it will take quite a bit to knock that confidence again, maybe a 2% rise will, but that"s not likely to happen anytime soon," says Lindeman.
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