NSW Excerpt from the 2012 October Market report


 A flurry of activity in the middle third of the market reflects a surge in first homebuyer interest

 New South Wales properties appear to have hit the bottom and bounced, with many Sydney suburbs and a number of regional areas recording growth over the second quarter of 2012. A recent report by Australian Property Monitors showed that while Sydney’s median house price of $642,425 is 1% below its June 2011 peak, it rose 0.2% in the June 2012 quarter, adding to a total growth of 1.4% for the year so far.

Other vital signs are also positive, such as unemployment and auction clearance rates. The 4.8% unemployment rate, according to the Australian Bureau of Statistics (ABS), is the lowest June figure for four years. Meanwhile, auction clearance rates averaged above 60% for the month of July, compared to approximately 55% during the same time last year.

“Sixty per cent is quite a reasonable result and shows buyers and sellers are balanced,” says Andrew Wilson, senior economist, Australian Property Monitors. “As a consequence, we’re starting to see some modest price pressure move into the market.

“This is a sign of increased confidence and of the underlying shortage of housing in Sydney, which drives demand and keeps markets solid throughout the cycle.”

Wilson believes the rebound can be largely put down to improved market sentiment, which is being driven by an easing of negative media coverage in recent weeks, as well as a perceived strengthening of the stock market.

Middle ground

Wilson says there has also been a marked increase in the number of buyers looking to take advantage of lower prices to upgrade their properties.

“Most of that activity is coming from the middle of the market – the change-up market,” he says. “There’s a lot happening in the middle-third, which is around the $600,000 to $1m mark. That middle-third is up by 4.4% so far this year and is tracking along its [historic] highs now.

“We’re also seeing a big surge in the number of Sydney investors. They are signalling that we have reached the bottom of the cycle and perhaps this is a time to enter the market. NSW is the only state where investor numbers are higher now than they were at this time two years ago.”

Record number of entrants

The upgrader market surge has been buoyed by a nationwide rise in first homebuyers. The AFG Mortgage Index showed that more mortgages were taken up in July 2012 than at the same time for any other year since 2007.

The first homebuyers market share rose from 15.6% of all mortgages arranged in June, to 17.3% in July, the highest level of first homebuyers since August 2010.

“Low interest rates, soft property prices and escalating rents create a powerful cocktail of incentives to get people into the property market,” says Mark Hewitt, AFG’s general manager of sales and operations.

APM’s Wilson notes that the budget end of the market is up by 1% this year so far, which is on top of a big surge towards the end of last year because of government changes. “We are now seeing a ripple flow-on effect into the change-up market,” he says.

Prestige suffering northern exposure

Despite improvements in other market segments, Wilson says Sydney’s top end continues to struggle, with the famed Northern Beaches bearing the brunt of the pain.

“The prestige market is still dragging the chain, with prices down by about 1.7% from last year and still about 6% off its highs,” he says. “There are some quiet signs that Eastern suburbs and Lower North Shore properties are starting to kick along, but the Northern Beaches are still the black hole and down by about 7% compared to a year ago.”

Regional strength

Outside the city, Wilson points to three towns that are showing positive signs.

“We are seeing good numbers come out of Orange, Wollongong and Newcastle,” he says. “All three centres have a mixed economic base, rather than being exposed to tourism, mining or manufacturing as a single aspect. Therefore, they tend to be more resilient in cyclical downturns and Orange in particular has recorded some healthy median house price growth this year.”

Not all report cards good

In the midst of recent positive news surrounding the NSW housing market, Deloitte Access Economics warns that despite leading the charge for the non-resource states, NSW continues to fall short in a number of economic areas.

These include housing construction, commercial construction, financial services and tourism. Deloitte Access Economics also claims that the property market is by no means out of the woods.

“House prices have been falling, and although latest data give hope that this fall is coming to an end, it is clear there remains some fragility on the housing price front. That has been a blow to confidences in the state with Australia’s largest mortgages,” it says.

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