Homeowners in Sydney, Australia, are holding onto their properties longer than ever.
Data from CoreLogic reveals that the median hold period for houses across greater Sydney has doubled from 5.3 years in December 2002 to 10 years in December 2022.
For units, the median hold period increased from 4.3 years to 8.3 years over the same period.
The longest hold periods for houses were in Sutherland, at 12.3 years.
This same trend is occurring in all our capital cities, and this is one of the many factors affecting the liquidity of our property markets.
Factors contributing to these longer hold periods
1. Stamp duty costs
The cost of stamp duty has risen alongside property prices, making it a significant financial burden for homeowners looking to transact.
The high cost of stamp duty is a major deterrent for potential buyers and sellers, as it adds considerable expense to an already costly process.
As a result, many homeowners opt to stay put and invest in home renovations or extensions instead of paying the hefty stamp duty fees associated with buying a new property.
2. Limited housing options
Even when homeowners overcome financial hurdles, there are few homes for sale to choose from.
Only 4% of Sydney homes were sold in the 12 months leading up to February.
Baby Boomers are not interested in moving into retirement villages, they want to stay in the same suburbs where they currently live and go to the same doctors, hairdressers and coffee shops.
But a lack of choice can be particularly frustrating for those looking to downsize as there is a shortage of family-friendly apartments that downsizers would be happy living in.
3. Changing desires
As families grow and their needs evolve, many homeowners often choose to stay put and use the money they would have spent on stamp duty to extend or renovate their homes to accommodate their changing needs.
This can involve renovating or extending their properties to provide more living space, adding bedrooms, or creating multi-generational living arrangements.
By investing in their current homes, these homeowners can avoid the costs and hassles associated with moving while still meeting their changing needs.
Additionally, many Baby Boomers prefer to age in their homes, and as mentioned, even those willing to downsize find few attractive alternatives.
4. Shift in homeowners' mentality
There has been a noticeable shift in the mentality of homeowners, with younger buyers often opting to stay in their first home for longer or rentvesting and buying their first home later in life.
This shift in how we think has led to a decrease in the number of transactions during our lifespan.
What does this mean for property investors?
At Metropole, we carefully research demographic trends to see how they impact the property markets.
We like investing in suburbs where there are fewer transactions because this creates stability in house prices, even though it makes finding A-grade homes for our homebuyer clients or investment-grade properties for investors more difficult.
You’ve probably heard me say that location will do about eighty per cent of the heavy lifting of your property’s capital growth.
That’s why it’s important to buy your investment property in a suburb that is dominated by more homeowners, rather than a suburb where tenants predominate.
And you’ll find suburbs where more affluent owners live will outperform the cheaper outer suburbs where the inflation-driven cost of living increases are hitting harder and where wages are likely to grow more slowly moving forward.
By focusing on locations that are tightly held by owner-occupiers, you may just find an investment that outperforms the market and delivers strong value and growth over the long term.
