Demand in NSW slows, but infrastructure and commercial upticks are keeping the state economically strong
Once one of the top growers on the national property scene, Sydney’s slide down the ranks has come fairly quickly. Along with Melbourne, it is now leading the nationwide downturn as a city dominated by investors and crippled by low affordability.
According to CoreLogic’s Hedonic Home Value Index, the 12 months to October 2018 saw property values in Sydney plummet by 7.4%. Moreover, eight of the 10 weakest capital city subregions in the country during that period were located within the Sydney metro. Three Sydney subregions also logged price drops in the double digits.
CoreLogic head of research Tim Lawless singles out the tight lending criteria as a reason for the activity slump. “Tighter credit availability is acting as a drag on housing demand and impacting adversely on the performance of housing values across most areas of the country,” Lawless says.
Over the same period, vacancy rates also rose in the metro to 2.9%.
Leanne Pilkington, president of the Real Estate Institute of NSW, says, “There has been a slight slowing in those seeking rental accommodation in inner and middle Sydney. Inner Sydney rose 0.4 percentage points to 2.8% and middle Sydney increased 0.1 percentage point to 3.2%.”
Commercial demand in Wollongong
Although the residential market is struggling, there’s a lot happening in Sydney and NSW as a whole to keep it in the black as an investment prospect. For instance, an infrastructure project is underway to repurpose the abandoned tunnels and platforms at St James Station, as per CoreLogic’s Cordell Construction Monthly report for November 2018.
Wollongong is also on the path to becoming a commercial hotspot following several years of investment. Knight Frank’s Wollongong Insight report indicated that the region’s vacancy rate in 2018 was its lowest in five years.
“The prime vacancy rate recorded 3.4% in January 2018, down from 8.5% two years earlier, reflecting recent demand for higher-quality buildings across Wollongong,” says Paul Savitz, the director of research and consulting at Knight Frank.
“The rise of the shared services sector is also becoming a significant user of office space across Wollongong, given the higher staff retention rates, lower salaries and lower leasing costs compared with Sydney.”
SUBURB SPOTLIGHT
WARNERS BAY: Units sustain value growth
Making its home on the shores of Lake Macquarie, Warners Bay is a picturesque suburb that’s the perfect place for walking, cycling, picnicking and watersports. Cafes and restaurants line The Esplanade, offering great views of the lake, with the Watagans Mountains as a backdrop. Warners Bay is also the location of the annual Lake Macquarie Running Festival held in August.
Units are on the rise here, with values going up by 2% over the 12 months to November 2018. Over the most recent five-year period, prices increased by over 20%, taking the median value to almost $500,000. At 4.2%, landlords get a reasonable average yield on rentals. Meanwhile, growth is slowing in the house market.
Growth: The unit market is stronger than the housing market, with prices rising at a greater rate
Amenities: Those who enjoy watersports and lakeside dining will love Warners Bay
