NSW Excerpt from the 2011 September Market report


The NSW capital is fulfilling predictions that it’s Australia’s most solid market

The property pundits have been predicting for some time that Sydney’s property market would be Australia’s shining light after Melbourne’s star had dimmed – and it seems like those predictions are coming true.

Investors seeking double-digit levels of overall growth may be disappointed, however, as being the most solid market in present times means that, basically, values aren’t falling.

“Sydney values have held up the best of all out of the capital cities,” says Cameron Kusher, senior research analyst at RP Data. “They’ve increased by 1.2% over the year. Still, if you consider that inflation’s at 3.3%, that means that properties are actually becoming slightly more affordable.”

Andrew Wilson, senior economist at Australian Property Monitors, agrees that Sydney’s holding up well – even if it’s treading water somewhat. He thinks that the market is “moving towards a stabilisation”, but that the prestige end of the market is characterised by a dearth of buyers.

“Sydney’s still a patchy market in terms of where activity is occurring,” comments Wilson.

“A property really has to tick all the boxes to get some buyer interest at the higher end, and that’s being exacerbated by the quieter winter months resulting in vendors waiting until spring anyway, when things are more active,” he comments. “One of the key factors driving the prestige market, and particularly Sydney’s, is the stock market – which is struggling. I think the ASX has to go well over 5,000 before we start seeing that wealth effect kicking through.

“However, Sydney’s probably got a bit more activity than other cities in the mid-to-lower buying areas, and that reflects the fact rents are higher in Sydney, there’s more competition for rental properties, so there’s that ongoing demand for entry-level properties.”

That’s the experience of George Raptis, the director of Metropole Property Strategists’ Sydney office.

“It’s the mid-section of market that is doing well,” he says. “The entry-level and first homebuyer markets are well and truly off the boil and the top end is struggling. However, the middle range is reasonably active.”

Raptis highlights that the market is still competitive despite the ‘abnormally high’ number of properties on the market and subdued buyer interest.

“There are a lot of properties on the market, but many of them are what I’d call ‘second-rate’ properties. They’re the ones that aren’t selling, or are being passed in at auction. The good quality properties in good locations are still attracting genuine interest and buyer competition.”

Rich Harvey, CEO of www. propertybuyer.com.au, agrees that the wheels haven’t stopped turning.

“Properties that are moving quickly are those where vendors are most realistic about pricing, and often moving within the same market.”

Kusher adds that units are holding up better than houses, too.

“Over the year, unit values are up 2.9%, compared to 0.5% for houses,” says Kusher. “That comes back to affordability. Sydney’s median house price is $590,000 whereas units are $466,000. There’s a pretty big gap there: we also know that affordability is an issue at the moment.”

Go west 

Raptis comments that Sydney’s traditional prime property heartland of the eastern suburbs may not be the best bet for investors right now.

“The eastern suburbs have softened somewhat, but the inner west is relatively solid, especially units, around the $400,000–500,000 price range,” he says.

Marrickville, Dulwich Hill and Ashfield are the places for buyers to pick up a good quality property in the mid-$400,000s, according to Metropole, whereas Enmore and Newtown may be peaking. In terms of houses, the $950,000–$1m price point in suburbs like Balmain and Leichhardt is slow, suggesting there could be opportunities for canny homeowners to upgrade.

Wilson agrees that the west of the city is a good option.

“The south-west, inner south-west, inner west and the west are quite popular, and there are still buyers looking for properties in that range from entry level up to $800,000–900,000,” he says. “Those areas have flown a little bit under the radar because they didn’t have the cachet the eastern suburbs, northern beaches and the North Shore have had. People are having to move to those areas because of the affordability issues, and that’s driving the growth.”

Wilson also highlights parts of the outer west such as Kellyville and similar suburbs north of Blacktown.

“Those suburbs are where you get McMansion-type developments: large houses, reasonably well serviced by the freeway and with a median price around the $700,000 mark,” he says. “Admittedly, it’s 20km out of the city and definitely a lifestyle choice: but still there’s a significant demand for properties.”

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