Despite Sydney’s robust markets over recent months, affordability remains an issue.
In many ways Sydney has been solid on all fronts. Demand is recovering, prices were inching up towards the end of last year and the economy remains sound. This doesn’t mean something isn’t missing. The last piece of this jigsaw puzzle may take time to catch up: buyer confidence.
Raine & Horne CEO Angus Raine believes that a lack of confidence is behind lacklustre buyer activity at the top end of the market, which has seen prestige properties struggle.
“This is a part of the market that’s definitely under a lot of pressure,” he says. “It’s all about confidence. People looking to buy in that bracket have got to have confidence in their job security and in the global economy before they start purchasing.”
Speculation of a rise in unemployment across the country and how European debt problems might affect Australia are doing little to encourage such confidence, Raine says. This has seen many buyers opt to do nothing. “People are sitting on their hands and waiting. They’re putting their money in the bank and watching what the property market, along with the global market, does.”
Sam Reilly, global research and consulting manager at CBRE, agrees that the Sydney market of late is generally seeing a drop in buyer activity the higher up one goes in price brackets. He cites selling periods extending from the end of 2010 for some prestige properties as clear evidence that the top end of the market is struggling.
“The overarching theme in the Sydney market at the moment is affordability. It’s a really important issue and the areas that are being perceived by the market to be more affordable have been able to sustain their price levels,” he says.
Raine adds that most properties in Sydney below the region of $800,000 have attracted much interest. One reason for this is that certain first homebuyer grant concessions end at the beginning of January. This artificially spurred that end of the market, with units in the middle rings of Sydney getting a lot of attention.
Other areas where sales are picking up include outer-ring regions and the Botany area, but Raine thinks that current sales volumes are less about location choices and more about simple economics.
“I think for buyers, what’s most important is the price point, not necessarily a particular region. In the current post-GFC environment, it’s all about the dollars.”
Considering the affordability issues the Sydney market experienced in 2010 – during a period of long prices growth – APM senior economist Andrew Wilson says there has been a growing acceptance of units as a lifestyle choice.
“Units are typically more affordable than houses and when there are affordability barriers like there were during the long prices growth, people will generally choose the cheaper option.
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