Owner occupiers to drive OTP demand: CBRE's David Milton
There are so many mixed messages at the moment about the property market. Not that there is just the one market. Sometimes the data assists, but more often it downright confuses.
Hence I was interested to glean insights on Sydney's residential off-the-plan property market from the market leaders, CBRE Residential.
Last year their well-engineered Saturday morning off the plan sales endeavours triggered near 100 percent whole block sellouts, but not any more. These days it's around 70 percent.
Indeed Sydney had returned to a “new normal”, the CBRE Residential managing director, David Milton suggested.
He's there at the showroom coalface so is able to combine the data with strong anecdotal insights.
He says his team's sales volume has dropped by 22 per cent although enquiries are actually up 11 percent. With more two bedders in the mix their average sale price rose over the year from $959,000 to $1.139 million.
“What we’re seeing is people being more particular about what they buy," he said.
He noted it was reflected in the enquiry conversion rate – which in the four months to the end of May saw 20,569 new enquiries resulting in 990 sales. In the same four months last year there had been 18,542 new enquiries resulting in 1,268 sales.
It didn't help that after the election was called on May 7 that enquiries were down 47 percent on 2015 enquiries.
However the return to more natural pace than recent times was more due to banks tightening lending for investors and also the FIRB buyer restrictions.
CBRE has seen the percentage of sales to investors drop from 60 percent to 51 percent as owner occupiers take up the slack. First home buyers secured just 8 percent of their developer stock which started from $420,000, up from the low a year earlier of $380,000.
With 16 of its past projects reaching contract settlements so far this year, Milton advised they'd secured a 99 percent settlement rate, despite higher lender caution.
“Supply in Sydney has peaked,” Milton concluded. New supply will slow due to development funding restrictions, while some sites will be put on hold.
But he expects the larger number of owner occupier buyers this year will drive demand and price increases for high-end apartments. Only 10 percent of their sales were three bedroom apartments, with 62 percent being two bedders and 28 percent one bedroom sales.
No sign of any price correction as apartments launched this year include Essence in Double Bay where prices peaked at nearly $33,000 per square metre, The Hensley in Potts Point selling for up to $32,000 per square metre, and Iconic in Waterloo in excess of $25,000 per square metre. It was up to $25,000 at Chatswood Place. Parramatta's Promenade launch in March - where prices started at $535,000 - secured sales at up to $11,600 psm.
Although the cost of buying property in Australia has increased for foreign buyers and lending is more restricted, David Milton does not foresee a long-term impact on demand from these buyers.
“There are some short term settlement issues with FIRB buyers, but longer-term they will find a solution."
Offshore funded sales will continue to account for a significant part of the market, he says.
This article was first published in the Saturday Daily Telegraph.