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First home buyers have remained on the sidelines despite the advantage of low-interest rates and government stimulus for new properties.
SQM Research’s managing director Louis Christopher has told a property seminar in Sydney that investors and upgraders, rather than first home owners, have been driving the recovery.
“What we may be seeing is a combination of investors using self-managed superfunds to get into the property space,” he said.
“We’re seeing more developments being built in Sydney’s west, and I think investors have been jumping in on that, and I think we’ll see a lot more of it.”
While first home buyers appear to struggle with house prices, especially in Sydney, Mr Christopher believes there are still options if they make sacrifices.
“First home buyers are being priced out of the market but I think they still have choices, and this is a bit of a dilemma,” he said.
“You have to live somewhere that may not be your first choice, it may be almost your last choice, but the choice is still there.”
First home buyers may have to rent and save for longer and decide whether they want to keep up or get into the market.
“They’re getting pretty dismayed by the price rises, which have already happened,” he said.
“And what’s been happening when they try and buy properties, [is that] they’re getting priced out.”
However, Mr Christopher remains optimistic that there will be a first home buyer response in Sydney’s west as they take advantage of the $35,000 government concession.
“In an optimal world, what we would see is a pick up in first home buyers buying new homes because that generates the economic activity that the RBA is hoping for and also creates a reasonable supply response too,” he said.
For more from the SQM Conference, including the top Sydney suburbs you should be watching, <a target="_blank" href="https://www.propertyobserver.com.au/new-south-wales/the-top-sydney-suburbs-to-watch/2013091965163">read this story with gallery attached</a>.
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First home buyers priced out of the market

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Sydney may be on track for a bullish housing recovery, but it will be the properties in the middle and outer rings of the capital city that will outperform, according to SQM Research’s Louis Christopher.  
Speaking yesterday at the SQM Research’s annual Afternoon of Property seminar, Christopher said the recovery has been “fairly broad based”, but has not yet taken place in the top end of the market.  
{yoogallery src=[images/stories/2013/09/20/cz]}
Photos: Taken at the event held in Sydney
“There seems to be a bit of a threshold there that once you get over $2 million, buyer demand falls away rather quickly,” he said.  
“The outperformance is going to be those properties under that threshold and most likely be in the middle and outer rings of Sydney.”  
The demographics of these areas are also expected to change on the back of a shortage of new housing in Sydney’s eastern suburbs.  
“We’re going to see the wealthy people start to move out to middle ring because the very rich are staying in Sydney’s east and the lower north shore,” Christopher said.  
“I think [middle-income earners] are going to be pushed further out into the west - into the outer ring - and I think that’s already been happening.”  
While the same types of bullish growth rates are not expected for the prestige market next year, Christopher believes it will pick up slightly.  
“We still think Sydney’s east is going to perform, but I think it’s going to be all the stocks under the $2 million mark in east Sydney where you’re going to see strong performance,” he said.  
Rental yield was identified as another consideration for investors who are weighing up where to park their money.  
Christopher warned that investors would be buying into a low yield environment, especially at the top end of the market.  
“The higher up you go, the lower the yield, and as an investor, the lesson from that is to consider maybe buying at the mid-level,” he said.  
“It just seems to be more cost effective if you buy properties roughly around the $500,000 mark than $1.5 million.”  
Interestingly, Christopher also pointed out that properties in Sydney’s east and Sydney’s west have been performing in line in the last few years, despite the significant gap in price difference.
For more head to the <a target="_blank" href="https://twitter.com/search?src=typd&amp;q=%23propertyobserving">#propertyobserving twitter feed</a>.
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Christina Zhou

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