NSW Excerpt from the 2012 July Market report

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Buyer sentiment appears to be improving following the recent cash rate cut by the Reserve Bank. However, some markets continue to struggle

 Growing confidence in Sydney’s property market pushed median house price 2.17% during the three months ending April to $662,500, according to Residex. The unit market continues to strengthen, adding 1.10% to $490,000 during the same period.

“The market in Sydney has remained reasonably resilient,” says Rich Harvey, CEO of propertybuyer. com.au. “Out of all the capital cities, Sydney has shown the least decline in median house price year to date.”

Sydney prices fell by a mere 0.9% year on year, according to Australian Property Monitors. This compares favourably to Melbourne’s 3.6% drop, Brisbane’s 4.1% fall in value and Perth’s 3.1% loss year on year.

The recent rate cut is also expected to further boost sentiment and fuel increased buying activity. “The 0.5% interest rate cut will help restore some confidence and is a step in the right direction,” says Harvey. “It will take 6–12 months for interest rate cuts to truly take effect. This lag provides an opportunity for savvy buyers to take advantage of cooler market conditions and secure the right property at the right price.”

Areas that are still struggling

Despite its relatively solid showing, Harvey says the prestige market (above $3m) is still struggling to gain any traction.

“Many vendors have had protracted marketing campaigns and significantly discounted sales results,” he says. “I recently saved a client over $1m on a $5.5m waterfront property in the Sutherland Shire. The harbourside playgrounds of the wealthy in the Lower North Shore and Eastern suburbs are experiencing a sluggish market.”

Harvey says as a whole, Sydney is still more of a buyer’s market. “We’re not seeing any real difference between numbers of homebuyers and investors in the current market,” he says.

“Those homebuyers trading up actually have a better opportunity to do so now and achieve value, rather than waiting till the market heats up. What vendors might lose in their sale price now, they typically make up for in the subsequent purchase price. For example, you can sell a $850k home now and trade up to a $1.3m house – if you take 5% off each transaction, you are better off doing this now than when prices may have increased 10% in two years’ time.”

Sydney’s sweet spots for investors

If you’re looking to position yourself strategically, Harvey reckons the terraces, semis and townhouses in the range $650k–$1m in Sydney’s inner-west are good bets. “These areas and properties are ripe for renovation and strong rental returns,” he says.

Harvey also points to the Northern Beaches with the suburbs of Manly, Freshwater and Queenscliff firmly in his sight. “Properties in the $750k–$1.2m for units with nice features and proximity to beaches are worth considering,” he says.

In the Forest area, Harvey likes Forestville, Frenchs Forest, Belrose, which are near the proposed Northern beaches Hospital at Frenchs Forest. “There is an opportunity to buy before major infrastructure investment and increased demand. For example, if you buy a house for around $800k–$900k, you get say $800pw rent. If you add a two-bed granny flat for $140k to get $400pw, you’re looking at a total investment of approximately $940k and achieving around $1,200pw rent giving you 6.6% yield in an area traditionally getting 4%–4.5% yields,” he explains.

In the Eastern suburbs, Harvey thinks there is value in two-bed units up to the $600k range that are close to Randwick and surrounds. In the North Shore, he thinks Lindfield, Roseville and Gordon houses that cost up to $1.65m and are close to great schools and the train line offer good buying opportunities.

The Western suburbs are also in Harvey’s sweet spots for investors. “There’s excellent value in houses in Liverpool, Blacktown and Penrith local government areas in the range up to $300k,” he says. “Houses suitable for renovation and adding granny flats are achieving yields of 9%–10%. Plus coming off a low base means opportunity for high capital growth – and being always affordable, there is an easier exit strategy.”

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