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Property market update: Sydney, November 2019

by Bianca Dabu | December 10, 2019
research
1 minute read

Property market update: Sydney, November 2019

December 10, 2019

After months of consistent decline, Sydney is now poised for a double-digit growth next year, according to experts. How can investors maximise this trajectory in the NSW capital?

Right Property Group’s Victor Kumar said that most of the capital cities across Australia will be benefiting from interest rate cuts and the loosening of credit conditions, which will ultimately lead to record dwelling price rises. Sydney and Melbourne will be leading the charge.

If the current market conditions remain, Melbourne could potentially see a price growth of 11 per cent to 15 per cent, while Sydney could see rises of around 10 per cent to 14 per cent.

If the cash rate is reduced by 0.5 per cent, the economy remains stable and the Australian Prudential Regulation Authority (APRA) does not intervene, Melbourne’s property prices could hike up by 12 per cent to 17 per cent while Sydney’s property prices could go up by 11 per cent to 16 per cent.

Due to the impending growth, property buyers are encouraged to act fast before competition pushes up prices next year.

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In fact, Buyer’s Domain director Nick Viner said that those who are keen to buy a new property should get into the market by Christmas to be able to secure a home at a reasonable price.

“Anyone who has overconfidently listed at an unrealistic price and not yet sold will see buyer numbers dry up in December and January. This includes owners who absolutely need to sell by new year for family or work reasons.”

Mr Viner believes that the Sydney property market could see growth of 10 per cent to 14 per cent next year, with the pick-up starting in late February or early March, when bargain properties dry up.

“Smart, opportunistic buyers are already gearing up to secure their home in the coming weeks. The best properties will be long gone by the time March rolls around,” according to the buyer’s agent.

Property values

Sydney dwelling values have increased by 2.7 per cent over the month – the largest month-on-month gain in 31 years which further solidifies the comeback of the capital city after a sharp correction that saw values falling 14.9 per cent from peak to trough.

CoreLogic’s November Home Value Index showed that the new median value of homes in Australia has hiked up to $537,506 as the value of properties sold across states grew by 1.7 per cent. This marks the fifth consecutive increase in the national index, with the November report showing the largest monthly gain in the national index since 2003 and the first positive annual growth (at 0.1 per cent over the past 12 months) since April 2018.

Hobart, Canberra, Melbourne and Sydney all moved back into the positive annual growth territory with increases ranging from 1.6 per cent to 4.2 per cent, while Darwin and PerthPerth, TAS Perth, WA saw the largest declines at -10.9 per cent and -7.7 per cent, respectively.

Currently, the median dwelling price in Sydney for both houses and units sits at $840,072.

In fact, some Sydney properties are now selling for $100,000 more than they were at the start of the year.

CoreLogic’s head of research Tim Lawless said: “We’re seeing momentum building and certainly holding quite strong in Melbourne and Sydney, where the quarterly rate of growth at 6.2 per cent and 6.4 per cent, respectively, is nearly as high as what it peaked at back in early 2015, just after the first round of macro-prudential changes.”

“It looks like the market is probably just as strong as it was back when it was racing along between 2012 [and] 2017. This really highlights how fast this rebound has been in those two markets.

“I think we will probably see growth continuing into early 2020 while supply levels remain very low, which is creating quite a bit of urgency in the market.”

According to him, Sydney’s prices, which are still 10.4 per cent below their peak, could return to their peak within the next six months.

Supply and demand

For the week ending 24 November across Australia, 2,599 homes went under the hammer, returning a preliminary auction clearance rate of 72.9 per cent, according to CoreLogic’s latest Property Market Indicator Summary.

Moving forward, CoreLogic expects auction numbers to go up by as much as 14 per cent, thus leading to the biggest number of auctions in 2019.

“Clearance rates across the largest cities have mostly remained above 70 per cent since July, implying that vendors remain in a strong selling position,” according to CoreLogic.

“With advertised supply remaining low and buyer demand rising, FOMO is once again becoming a factor in the market as buyers sense some urgency to buy before prices rise further.

“With auction volumes set to rise, it will be important to see whether clearance rates can hold up under the increased level of supply being brought to market over the coming weeks.” 

During the final week of November, 934 auctions were held in Sydney, returning a preliminary clearance rate of 82.3 per cent. In comparison, the previous week saw 947 auctions and a final auction clearance rate of 71.9 per cent.

“One year ago, 1,035 auctions were held and the clearance rate came in at 44.8 per cent. Over the next few weeks, we will see the depth of buyer demand tested, with an increase in the number of properties taken to auction.”

Overall, among the busiest suburbs this month in terms of auction numbers are Mount Waverley, Bentleigh East, Balwyn North, Glen Waverley and Reservoir in Victoria and Mosman in NSW.

Mr Kumar said that, come next year, first home buyers will be driving the markets as they seek to take advantage of lower prices and the government’s first home deposit scheme, which will come into effect at the start of 2020.

Demand in Sydney and Melbourne, in particular, will remain solid as they continue to be home to around 40 per cent of Australia’s population.

Moreover, there is a significant number of major infrastructure projects under way, as well as decentralisation plans that will see new major economic hubs and employment nodes created and housing design and planning revolutionised.

In Sydney’s south-west, for example, a developer trials the creation of small lot dwellings to help keep prices low.

Rental market

While there has been a surge of rental demand across Sydney driven by overseas migration, a healthy economy and the high cost of home ownership, the NSW capital is currently seeing rental price going backwards, according to Propertyology’s Simon Pressley.

Mr Pressley puts it down to record housing construction “combined with a high volume of extra investment properties being added to the rental pool during Sydney’s property boom”.

Sydney vacancy rates are now at an all-time record high and rents are declining.”

Due to a sizeable pool of new properties still in the construction pipeline and more Sydney-siders choosing to migrate to other parts of Australia, Mr Pressley believes that Sydney’s rental market will remain soft for the time being.

Sydney in 2020

Several economic and political factors will continue to impact the Sydney property market in the coming year, according to Starr Partners CEO Doug Driscoll.

Among the top 10 trends that property investors can expect to see in 2020 are:

  1. Property owners to sit on their hands; listings to remain relatively low; more stocks by the end of 2020
  2. “Stampede” of first home buyers in January
  3. Property prices to increase by 5 per cent to 10 per cent over the year
  4. Average days on the market for properties will fall due to imbalance between supply and demand
  5. Quality of buildings will also receive greater media attention following the Opal Tower crisis and the Mascot Towers event
  6. Houses will continue shrinking in size
  7. Australians will remortgage in record numbers
  8. More landlords will consider multiple occupation
  9. Australia will become more popular for interstate investors
  10. 2020 will centre around the review of stamp duty

Ultimately, buyers are advised to take advantage of good deals around Christmas time because the market could very well heat back up after the holidays.

By late February or early March, bargain buys will be drying up, according to Mr Viner.

“I consistently do some of my best deals around Christmas, but this year, it’s even more important to buy now because I think the market will heat back up after the holidays,” he commented.

“Smart, opportunistic buyers are already gearing up to secure their home in the coming weeks.

“The best properties will be long gone by the time March rolls around.”

To be ready to snap up property in this “rare window of opportunity”, he advised investors to always have their finances ready, stay on top of sales evidence and listings, be enthusiastic and engage a buyer’s agent.

Hotspots

Sydney’s Seven HillsSeven Hills, NSW Seven Hills, QLD has started to gain popularity due to the recent developments in the area that has ultimately lead to a revamped village lifestyle, Civic Properties’ Chris Ferris and Laing+Simmons’ Sahil Sapra said.

Civic Properties’ $250 million planned community “The Hills Village” has seen significant interest from owner-occupiers as well as investors looking to grow their portfolio.

Set for completion in 2020, the project stands as the first planned community in Seven Hills, with over 400 apartments to be delivered across four separate buildings.

According to Mr Ferris: “Our vision is to bring city-style living to Western Sydney and make that easy lifestyle accessible and affordable right here in Seven Hills.”

“Savvy investors see the potential growth to be realised in Seven Hills, as the next logical step from the rest of the Hills District,” Ms Sapra added.

“This is also the second stage of the Hills Village, and with every stage, prices will go up, so investors have been keen to get in early to capitalise on this growth.”

 

Track the major market movements in Sydney and get to know more about the capital city’s growth drivers and hotspots through Smart Property Investment’s April 2018May 2018June 2018July 2018August 2018September 2018October 2018November 2018December 2018January 2019February 2019March 2019April 2019May 2019June 2019,July 2019August 2019September 2019 and October 2019 market updates. Visit Smart Property Investment’s Property Market News page to get updates on other major capital cities.

Property market update: Sydney, November 2019
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