The significant performance of Sydney’s property market has had positive effects on the nation’s capital growth.
“Overall capital growth in median value houses across Australia was 3.98% over the three months ending July, which was largely driven by strong growth in the metropolitan and regional markets in New South Wales,” explains Eliza Owen, market analyst for Onthehouse.com.au.
“July saw even stronger performance in Australian units, as the median value increased 4.78%. Again, growth was largely driven by increases in New South Wales.”
The enormous recent upswing in Sydney has dwarfed the milder increases in the other capital city markets, and Owen adds that the median Sydney dwelling price is now “approximately 1.5 times, or 150%, what it was worth five years ago”.
Nonetheless, the July figures seem to confirm that the Sydney boom period is winding down. Annual growth hit a low of 3.95%, the lowest since May 2013.
Rental market in a pinch
In line with the changing market dynamics, Sydney is reporting its weakest annual changes in rental rates, according to CoreLogic’s rental review for August 2016. Tenants have been spoilt for choice due to the significant supply of houses. Moreover, many landlords have not been maximising returns, given the low cost of debt and high capital gains in the current market.
“Housing supply, and subsequently rental supply, is continuing to rise and set to increase significantly over the coming years given the level of stock under construction. As growth in wages and the population continues to slow, it is unlikely we will see a turnaround in rental markets in the short term,” CoreLogic points out.
“The low yield profile across Australia’s two largest cities [Sydney and Melbourne], which are also the cities that attract the largest investment demand, suggests that most recent investors, despite the low mortgage rate settings, are likely to be utilising a negative gearing strategy to offset their cash flow losses against their taxable income.”
Push for housing diversity
Despite slowing growth, Sydney’s population continues to surge, prompting NSW Planning Minister Rob Stokes to propose the construction of different types of properties to accommodate this. The Urban Taskforce points to the city of Shanghai as a model for Sydney to emulate in this respect.
“Sydney can learn from the booming cities of Asia, including Shanghai, where planning authorities have ensured that infrastructure is provided to support the growing population, with very fast trains, extensive metro systems, mixed-use cosmopolitan zoning and a focus on global jobs,” the Taskforce reports.
“It is too easy to typify Shanghai through images of the high-rise in Pudong without understanding the broader city structure, in the same way that the Sydney CBD skyscrapers do not sum up the overall built form of Sydney.”
The Urban Taskforce supports a diversity of solutions to the state’s unique housing needs, including “high rises close to railway stations and town centres surrounded by mid-rise buildings”.
Sydneysiders have recently shown a liking for centrally located, high-quality property. Herron Todd White notes in its Month in Review for September 2016 that as land allotments get smaller within areas near the CBD, premium apartments and terraced homes are in demand.
“The empty nester market is a strong driver of demand for this style of property, though it is becoming increasingly desirable for families to relocate into this style of accommodation, as proximity to amenities such as restaurants, shopping, parks and harbour foreshores become increasingly sought after and desirable,” the report states.
SUBURB TO WATCH
Nelson Bay: Affordable waterside getaway makes ripples
A beloved holiday destination, Nelson Bay in Port Stephens has been described as “the Florida of New South Wales”. It’s approximately an hour’s drive from Newcastle, making it quite accessible for city residents looking to get away. Those without their own vehicles can take advantage of the local coaches to Newcastle, Raymond Point and Soldiers Point, as well as the express service from Sydney.
Nelson Bay is a hub of water activities, such as surfing, fishing, and dolphin and whale watching. Many parts of the suburb are also within the Tomaree National Park.
After a period of struggle following the GFC, Nelson Bay recovered in 2013 and has since been growing – over the past 12 months values rose by 4%, and Herron Todd White reports that the market has been stabilising this year. Renovation and investment activity is high, especially for units, given the significant 5% average rental yield.
“With a population largely driven by couples who are outright homeowners, there will continue to be demand for detached family homes, many of these built post 1970s. Nelson Bay and its surrounds cater for a range of property types from unit style living to large detached family houses,” Herron Todd White states.
