Sydney’s unit market may be showing signs of recovery
While the trend of falling prices observed in the December quarter has continued, units in Sydney are showing signs of growth
Sydney’s real estate scene for 2016 looks promising. As per the Knight Frank Residential Property Index released last April 13, the most expensive homes in this region saw a 14.8% increase in value over the past year. In fact, Sydney is expected to be the top performer in the Australian real estate market.
Nerida Conisbee, chief economist of REA Group, indicates that as the economic performance of New South Wales and Victoria surpasses that of the other states, particularly the mining states of Western Australia and Queensland, housing demand in these achieving regions improves along with population growth.
“Sydney has made huge headway in improving major infrastructure projects over the past three years and this has led to a lot of positive economic impacts,” she says. “Sydney and Melbourne continue to outpace house prices to the rest of Australia, consistent with economic growth in both those cities. Our larger capital cities continue to see growth and this is likely to continue.”
Indeed, houses in suburbs such as Gooloogong, Wombarra and Tarrawanna have experienced significant growth over the past 12 months. For Tarrawanna, this continues a consistent growth trend that has been observed over the past five years. By contrast, Gooloogong had no recorded growth for the past few years, but it has burst onto the scene as the New South Wales suburb with the most significant price increase, according to CoreLogic RP data.
The performance of units has been particularly remarkable in Waverley, which saw strong growth over the past five years from 72% to 35% and back up to 48%. The unit market in Ultimo
has also been doing well. Conisbee confirmed that most building approvals in Sydney at present are for apartment development – as a result, the amount of stock increases. “The supply of apartments in Sydney continues to grow,” she said. “Land shortages here, particularly in the inner areas, are more pronounced.”
“While Sydney lags Melbourne and Perth
in terms of housing development, it is seeing the highest level of apartment approvals of all our cities. Apartments are popular, not just in the inner urban areas, but also in the middle and outer ring suburbs. There has been a distinct structural shift in apartment living in Australia, however, the impact is still most pronounced in Sydney.”
Despite the increases in both house and unit prices (6.9% and 5.8%, respectively), Domain Group’s chief economist Dr Andrew Wilson takes a different view of Sydney’s property market. “It’s a bit of a mixed market,” he stated, noting that Sydney experienced one of its sharpest declines since 1993.
“It’s really the inner suburban, high-priced areas that are holding the market up. There’s been very strong growth in the lower north over the quarter, and if it wasn’t for that, we would have had a sharp decline in prices.”
In the Domain House Price Report compiled for the March 2016 quarter, he pointed out that the capital’s median house price fell below $1m, whereas unit prices dropped to just over $650,000.
These price dips continue a trend that was observed back in December, although the decrease is less severe than it was last quarter.
“We can expect subdued conditions to continue over the remainder of the year, with any price growth unlikely before spring,” Wilson says. He also notes that he expects prices to flatten out, an advantage for first time homebuyers, and growth to hover around 5%.
Eliza Owen, market analyst for onthehouse.com.au, also pointed out in a recent market update that the growth experienced by the house market in Sydney dropped slightly over the last quarter by 2.17%, whereas the unit market increased a bit by 0.81%. Rent rates for units have also jumped over the past year, unlike those for houses. Indeed, SQM Research data suggests that as of April 16, the rental yield for units is considerably higher than that for houses. Owen highlighted the findings of research conducted by the University of New South Wales’ City Futures Research Centre, which implied that the presence of vacant homes throughout Sydney may have contributed to high prices while limiting supply. Many of these properties are found in inner-city suburbs that report low rental yields. This may be indicative of the desire of investors to take advantage of negative gearing in order to avail of significant tax concessions from capital gains.
Nevertheless, Sydney’s performance, good or bad, appears to influence the state of other capitals. “It could be that as property becomes more out of reach during upswings in Sydney, investors spill over into the more affordable markets nearby,” Owen says.
SUBURB TO WATCH
Greenwell Point: This seaside suburb is making a splash
Considered an excellent inexpensive seaside getaway, Greenwell Point has made a name for itself with its famous seafood and casual, chill environment. Located just a couple of hours’ south of Sydney past Wollongong
, this Shoalhaven suburb is a lively area that attracts many people.
Houses remain quite affordable here at a median price of just $432,000. Nonetheless, Greenwell Point has seen a lot of growth, especially over the past 12 months. The area is favoured by retirees who enjoy the laid-back atmosphere, as well as by families. Greenwell Point also appeals to investors, who can gain over 4% yield. In general, residents look for properties priced between $400,000 and $500,000, as well as homes facing the river on higher ground.
According to Peter Rapley, sales consultant at Raine & Horne Nowra, this suburb has “everything”. Both nature-based and man-made amenities are provided, and public transport to CBDs is easily accessible.
Given its proximity to Nowra, quiet environment and affordability, Greenwell Point is expected to sustain considerable growth throughout the decade.
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