Boom time is officially over as Sydney enters a new phase of the cycle. But don’t expect prices to fall any time soon
The buyer exuberance seen during the past year appears to be finally abating, if the latest stats from CoreLogic RP Data are anything to go by.
According to the September results, median dwelling prices rose just 0.1% during September to $785,000. During the past 12 months, prices surged by 16.7%. While these numbers are still strong by any measure, they are slightly weaker compared to the July results when prices grew by 17.6%.
“The slower month-on-month reading across the Sydney market comes at a time when auction clearance rates have slipped to the low 70% range from week to week, and the number of advertised properties has risen,” explains Tim Lawless from CoreLogic RP Data. “Vendors are still enjoying strong selling conditions, but it looks like buyers are slowly regaining some leverage in what has been a very hot market.”
Growth set to continue, albeit at a slower pace
Despite the telltale signs of a flattening market, Linda Phillips, head of research at Propell National Valuers, remains upbeat about Sydney’s prospects.
“We expect Sydney home prices to continue to march on to record heights,” she says. “Although prices have risen considerably in the last three years, this is a boom, not a bubble, since it is a reflection of demand. Demand exceeds supply. Sydney does not have the capacity to house all the people that would like to live there. While a construction boom for apartments is now under way, it still leaves demand way in excess of supply.”
Sydney-based buyer’s agent and CEO of PropertyBuyer.com.au Rich Harvey agrees that Sydney is seeing a gradual slowdown but he doesn’t expect anything catastrophic.
“The market is certainly losing a bit of momentum, which is good,” he says. “Property prices are not tanking or crashing like what some media are saying. What we’re seeing is the slowdown of activity. There’s no more frenetic activity, no more FOMO [fear of missing out]. We’re seeing more measured selling and buying.”
This means that while vendors can still expect to get reasonably strong selling prices, they have to be more realistic, according to Harvey.
“You haven’t missed the boat if you haven’t sold. There’s still going to be some growth, just not as strong as it has been compared to the past two years. Don’t expect to get a massive over-reserve price when you sell.”
Rents soar to a record high
Unfortunately for tenants, Sydney’s housing rents are rising at the fastest annual rate seen in four years, according to Andrew Wilson, senior economist at Domain.
Quoting its latest Rental Market Report, he points out that the median rent climbed by 1% over the September quarter to a record of $530 per week. This is 3.9% higher compared to a year ago.
Median rents for units also increased sharply, surging by 2% over the quarter to a new peak of $510 per week, which is 3% higher than a year ago.
Sydney has now overtaken Darwin to become the most expensive place to rent a unit in Australia.
“Sydney is the standout capital this quarter, with rental prices continuing to rise, despite an increased supply of properties available,” says Wilson. “Low levels of first home buyers are offsetting investor activity, and the record levels of new buildings is having no effect, with demand remaining higher than supply.
“Sydney is now the most expensive capital in Australia for unit rentals – and this is a concerning trend for first home buyers. Notwithstanding the deposits required for purchasing property, increased rents mean there are more outgoing expenses for first home buyers and therefore more time and savings needed to meet the requirements.”
SUBURB TO WATCH
Waitara: Small but formidable
A small suburb in Sydney’s Upper North Shore, Waitara has been making strong waves over the past couple of years. In just 24 months, median unit values surged by 36.29%, according to OnTheHouse.com.au. This equates to a capital growth of $173,500 for unit owners.
Covering an area of just 1sqm, Waitara has a total of 3,791 dwellings. Of these, 424 are houses and 3,367 units. There are 5,370 people living in this tiny area, predominantly a younger demographic aged between 25 and 34 years.
The number of owner-occupiers has jumped significantly over the past five years, with the ABS
showing that half of the suburb’s residents (49.3%) own their own home. This is a big jump from the 40% recorded in 2006.
Properties in the suburb are in tight supply: there were only 14 properties listed at the time of writing. This equates to about 0.37% of all properties in the suburb. Properties are literally walking out the door, with vendors selling within just 16 days of listing.
The suburb’s main attraction is its proximity to Hornsby CBD, which is touted as the next Chatswood. Waitara is serviced by a number of regular trains to the city. Buses are also fairly regular and frequent. It’s a family-friendly suburb and still a relatively affordable option on the Upper North Shore.
