Across NSW, 2012 was very much the tale of the stay-in-bed investor, but will sentiment and buying activity improve over 2013?

 

It’s been a long wait for the Joyce family. Their beautiful face-brick home, up for sale in NSW’s mid-north coastal community of South West Rocks, has had its asking price dropped many times, but with no luck. More than 320 days since they first listed it they still haven’t found a suitable buyer.

It is a fate shared by the owners of 310 Tuggerawong Avenue in Tuggerawong, some 250km south. Their property has been on the market for over 500 days, as of yet, unsold.

In fact, all across NSW, numerous sellers are having a tough time getting their properties to change hands for acceptable prices. This is the same in areas as far apart as South West Rocks, Tuggerawong, Green Point, the Hunter Valley, and Ourimbah, on the central coast, all of which are experiencing average property listing periods close to a year, according to RP Data.

These suburbs have been joined by a host of other affordable suburbs, in regions ranging from the Central West to Sydney and the Northern Rivers, where buyers remain largely absent from the property market.

One of them, quite surprisingly, is the unit market in the Sydney CBD. Right in the heart of the city – in what is arguably a highly desirable location – the average listing period for units during 2012 was just over four months (according to RP Data). This is a stark contrast to two years ago when properties in the same area where selling within 50 days, on average.

Tim McKibbin, chief executive of the Real Estate Institute of NSW says “It has to be acknowledged that during 2012, market confidence, or lack thereof, had an effect across the entire spectrum.’’ “The greatest challenge we face in 2013 is installing that much-needed confidence back into the market,” he says.

 

Sourcing the problem

 

McKibbin adds that over 2012, there was a reduced level of transaction activity and he believes that much of this had to do with public perceptions of the Australian economy.

“I accept that some parts of the world, particularly the Euro zone, are in the midst of serious economic difficulties, but I believe Australia’s response to what is happening overseas has been disproportionate to the true impact that global economic difficulties have actually had on Australia,” he says.

“When the market realises that it has reacted in an overly-cautious manner, and we see continued improved economic performance in the United States, I believe we will see slow but solid improvement in our market’s confidence,” he says.

LJ Hooker CEO, Georg Chmiel agrees that buyer confidence has been guided by perception, but this perception has not always matched reality. “Reports in the media about international economic woes and the sometimes over-dramatization about the state of the Australian economy did not help, especially during the first half of the year,” he says.

Chmiel adds however, that a similar situation is unlikely to occur over 2013, due largely to an improving market. “RBA rate cuts take between six to 12 months to filter through to property markets. [In 2013] we will start to see the market turnaround. First homebuyers will also return to the market and make purchasing decisions after having retreated from the marketplace when temporary boosts to first homeowner’s grants ended,” he says.

 

Waiting for improvements

 

Chmiel’s estimate – that it will take some six to 12 months for RBA cuts to improve buyer confidence – could partly explain the recent findings of the Westpac Melbourne Institute’s latest index of consumer confidence.

According to the institute’s chief economist Bill Evans, in January the index remained 2.7% below the level it was in November 2011, regardless of 150 basis points of rate cuts.

The index also found that assessments of current family finances were 8.6% down on 2011 figures, with outlook for the next 12 months down by 1.2%. The one positive is that sentiment toward buying a house has gone up 11%. This puts this measure close to highs seen in 2009 when house prices lifted nationally.

For Australian Property Monitor’s senior economist Andrew Wilson, results like these add up to patchy prospects for improved consumer confidence. “We still have fragile buyer confidence,” he says. “Housing markets are performing reasonably in NSW, but it’s still patchy and it’s still mixed, so we’re not out of the woods in terms of a general upturn in sentiment and activity.”

 

Spotlight on: Highest inner-city discounts (median under $700k)

 

Owing to the strong attraction of living close to the city, it is pretty hard to find good discounts on inner city properties in Sydney. This is especially true when considering property in the more affordable price brackets, since more buyers inevitably mean more demand and less scope for negotiating with vendors.

That said, inner Sydney does offer some bargain hunting gems. St Peters houses are a case in point, where the average vendor discount on properties is now at 13% off the original listing price.

Edgecliff, with its attractive location sandwiched in between the CBD and the city’s eastern suburbs and beaches, is also seeing a lot of buyer’s dropping their asking prices. The current average vendor discount on units is at 12%, but despite this, prices have actually been increasing over the 12 months to December. RP Data figures show that unit prices in the suburb have increased 7% – outscoring city-wide average growth for 2012.

One reason for this may simply be that a lot of vendors have been slightly out-of-touch with the market when posting their original listing prices.

 

Surry Hills

 

There’s trendy and then there’s Surry Hills. Perched between Sydney’s Central Station and the popular entertainment spots of Darlinghurst – the suburb oozes with yuppie attractions.

It has some of the city’s best restaurants and bars, and with the CBD in walking distance of many parts of the suburb, there’s plenty to keep tenants coming in.

In the past, the big drawback would have been the price tag – houses have a median price of over $800,000, while the median price of units is $505,000 – but recent price performance suggests that the area may have become a lot more affordable.

RP Data December figures show 12 month unit growth at -2%, but the average vendor discount for the suburb is close to 7%; suggesting now is as good a time as any to be getting into what remains one of Sydney’s blue chip suburbs.

Surry Hills also offers some of the best rental returns within 5km of the CBD. The latest RP Data figures show an average yield of 6% for units, significantly higher than other inner-city suburbs of a comparable distance to the CBD, such as Beaconsfield (4%) and Glebe.

Sales figures also point to just how desirable the suburb is. Some 260 unit sales were recorded over 2012, of which the average sale occurred just 52 days after each property was listed. This is significantly faster than the national average, where most properties sell after more than 90 days of being listed.