Auction clearance rates have been off the charts in Sydney, rising above 80% throughout the early spring selling weeks. Despite the high result, the number of auctions held was down from last year, which could perhaps be attributed to the lack of properties on the market. These factors have combined to prompt prices to skyrocket, as buyers want to snap up whatever stock is available.
To meet heightened demand, the number of dwelling approvals has increased by over 5% for both houses and units. Moreover, the prestige market has been flourishing.
“We are forecasting that the prestige market will continue to grow at a healthy rate, as interest from international and local buyers continues to grow at an extraordinary rate,” says Simon Cohen, co founder and managing director of Cohen Handler.
“This year we are already expecting to cross $250m worth of prestige properties purchased. With a limited supply of prestige properties available, the market will remain competitive. As we lead into the spring and summer months, we typically see more competition among high-end buyers.”
Nonetheless, the metro appears to be buckling under the strain of such high prices and the weakening of transport infrastructure as a result of population growth.
Sydney’s suburban sprawl
For those priced out of the market in metro areas, the regional NSW region may be worth exploring.
For instance, Illawarra’s properties are affordable, offering waterside living, while Sydney is accessible by car and train. This region has been consistently strong since 2013 as demand has gradually shifted to the area.
Elsewhere, it’s interesting to note that house market growth has been strong in areas like Wollongong, the Blue Mountains and the Central Coast, according to Knight Frank’s Australian Residential Review.
“The suburban sprawl of Sydney has caught up, and sooner rather than later we’ll consider Wollongong part of Sydney,” says Andrew Wilson, chief economist at Domain Group.
The market for new estates in Southwest Sydney has also been active over the past two years, because these properties are affordable and interest rates are low. In this market, developers control the amount of stock, and the homes generally appeal to first home buyers, upgraders and investors.
Mixed growth outlook
Following years of all-around significant growth, the performance of the Sydney property market has been mixed lately.
“Off the plan apartment sales appear to have been affected by recent changes to the way foreign investors can finance their purchases,” Herron Todd White states in its Month in Review. “Local investors have also left the Sydney scene chasing more attractive returns and stronger prospects for capital appreciation in other states.”
As supply looks to increase due to the loss of investors and the staggering prices, values may eventually drop. Unlike before, buyers are no longer willing to accept poor stock just to be able to settle in the city.
For instance, properties on irregularly shaped blocks or facing busy roads can no longer be priced at a premium, since buyers will leave such dwellings on the market for a long time.
“It appears the panic has well and truly disappeared from the market, with buyers unwilling to pay overs for an inferior product,” Herron Todd White says.
Nonetheless, suburbs north of Sydney continue to report growth as a result of limited stock. This is because the properties here meet important criteria, including convenient transport services and proximity to top schools.
SUBURB TO WATCH
Murwillumbah: Gold Coast neighbour offers affordable coastal living
Located in northern NSW’s Tweed Shire, the suburb of Murwillumbah has been experiencing a rise following a slow period. This can be attributed at least in part to its affordable prices: houses are selling here for a median price of under $400,000 and units are going for under $300,000.
The suburb is characterised by older dwellings in the Queenslander and bungalow styles, which are ripe with renovation potential and appeal to investors. The significant rental yield of over 5% is also a draw.
Despite being part of NSW, Murwillumbah is actually closer to the Gold Coast and can offer buyers a relaxed beachside lifestyle. Residents have access to bus, coach and train transport.
