Sydney still sizzling hot
Sydney’s market is defying expectations to remain sizzling hot, and the glory days are not over yet. But experts say there are still opportunities for investors
Famous for its spectacular harbour, glistening beaches and waterfront vistas, Sydney always maintains a summer sizzle. And these days that heat seems to extend to the city’s property market too.
Whispers that the NSW capital’s market simply can’t maintain its current temperature continue to swirl. But, to date, there is little indication a cooling period is underway.
For example, take the latest CoreLogic RP Data Home Value Index results. They show that dwelling values in Sydney rose by 1% in November, and over the quarter ending 30 November they rose by 3.1%. Further, over the past year the city experienced value growth of 13.2%.
These results mean that, yet again, Sydney is the country’s best-performing capital city – although it is worth noting that, with a median dwelling price of $705,000, it is also easily the most expensive.
CoreLogic RP Data research analyst Cameron Kusher says that, after being one of the main drivers of growth over the last year, Sydney’s annual value growth peaked at 16.7% in April 2014.
Market indicators such as auction clearance rates and sales listings remain quite strong but also point to slightly weaker overall housing market conditions, he adds.
However, according to Positive Real Estate coach Elaine Chase, the Sydney market is sitting at between 10 and 11 o’clock in its cycle and retains the characteristics of a hot market.
While Sydney has experienced excellent growth in the last few years, it is locked in by mountain ranges and suffers from a shortage of available land, which limits supply, Chase says. “With lots of job creation occurring, plus a new airport, there will be lots more demand … And with limited supply, prices will continue to rise.”
High demand to continue
There is still momentum in the Sydney market, Propertybuyer.com.au CEO Rich Harvey agrees.
In his view, a degree of tapering in terms of growth is starting to be evident. “In 2013, growth was about 16%. In 2014, it will probably come in at about 11%. In 2015, I would say it is likely to be about 7%.”
Despite this, the high level of unsatiated demand out there, combined with continuing low interest rates and ongoing consumer confidence, means that people will keep buying.
Further, Harvey says that, barring a domestic or international economic crisis, strong demand for Sydney’s limited supply of property will continue.
“I don’t think we will see the continued over-the-top smashing of reserve prices. But there is still petrol in the tank for growth,” he says.
Chinese investment, the potential for oversupply, and the trend towards downsizing are all set to continue for the foreseeable future.
These issues will have some impact on particular markets within the broader city market. However, Harvey thinks it is another two factors that will have the most impact on Sydney’s market. These are:
1. The planned growth corridors in the northwest and southwest of the city, which will impact on six council areas.
2. The state’s current and “unprecedented” infrastructure spend, notably on transport projects and hospitals.
All of these projects are set to improve liveability, price and value prospects for the parts of the city they are in. For example, building the new Northern Beaches Hospital will create jobs and lead to increased demand for housing in the area. This will impact on prices.
For this reason, property in the affected areas presents a huge opportunity for investors, Harvey says. “Investors haven’t missed the boat in Sydney. Not by a long shot…especially not in western Sydney.”
The potential impact of the Badgerys Creek airport development is also on everyone’s radar, he continues.
“But don’t buy right by the airport. Instead, investors should go for the areas nearby – like Liverpool, Blacktown
and Camden – where there is established infrastructure and the potential for development due to rezoning or value-adding additions.”
Meanwhile, the latest Herron Todd White report notes that a cooling down of the Sydney market was expected but has not yet occurred. Describing investor activity as “rampant”, it provides a breakdown of the performance of different price brackets within the market.
In the under-$1m price bracket, which includes suburbs in the Camden, Blacktown and Penrith LGAs, the report says there has been strong, double-digit growth. And yet prices continue to grow as demand has not slowed for areas with good fundamentals.
The report adds that the Badgerys Creek airport project, the southwest railway, and surrounding employment and commercial hubs will continue to drive demand.
SUBURB TO WATCH
Plumpton: Demand runs high
Appearances can deceive, and such is the case in Plumpton. The understated West Sydney suburb has been a quiet achiever of late: it recorded 46% growth over the last 12 months.
This growth has been driven by a combination of affordable prices and location. As Sydney prices rise, buyers are looking out to suburbs like Plumpton.
While the suburb is 46km from inner Sydney, it has easy access to the CBD via the Westlink M7 motorway, which sits on its east border. Reliable public transport makes commuting possible.
More importantly, Plumpton sits in the rapidly growing city of Blacktown.
Blacktown is part of the northwest growth corridor. Both its economy and its property market are poised to benefit from the development of the corridor, and the new Badgerys Creek airport.
All of these factors are expected to further assist growth in family-dominated Plumpton.
Plumpton itself is primarily residential but has a small commercial precinct based around the Plumpton Marketplace complex. There is a decent array of local amenities, and neighbouring Mt Druitt offers any services Plumpton is missing.
While not a flashy suburb, demand for Plumpton is currently running high. In the unit market the vacancy rate is 0%, and there is 0% stock on market.
According to a representative of Elders Real Estate Rooty Hill, there are no noticeably good or bad streets.
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