Inner Sydney property market sees limited numbers of buyers for off the plan units: HTW residential
The CBD and inner Sydney suburbs are geographically within a relatively small area, however there are many sub-markets at play within these regions, according to the latest Herron Todd White (HTW) residential report.
The valuation firm took a look at what things traditionally matter to property markets and how current crisis is playing into decision making.
As a generalisation, the report suggests some of the big- picture elements that impact on the market include interest rates, availability and ease of finance, affordability, changes to overseas purchasing and oversupply of new units in certain areas.
Interest rate cuts and improving general market sentiment along with a limited supply of established stock in many inner city areas have been some of the main drivers of strengthening market conditions and property prices over the past few months.
"With proximity to the CBD, public transport and lifestyle amenities, the inner city is a popular choice for first home buyers," the valuation firm said.
This market segment is urrently performing well, with lenders favouring owner-occupiers over investors, interest rates at record lows and first home buyer incentives available from the government.
Upgraders were hit hard when lending was tightened last year, however as interest rates have dropped and APRA regulations have been relaxed, buyers have returned to properties within the $2 million to $3 million bracket, the report notes.
A parkside residence at 2 Heath Street, Five Dock (pictured below) recently sold for $3.555 million (PriceFinder) after 26 days of its auction campaign (source: RP Data).
The property is built to a high standard with basement parking and enjoys views over the adjoining park.
"Downsizers are also cashing in on the rising market, selling large suburban homes or inner city terraces and often entering the premium unit markets within the inner city, such as Jackson’s Landing at Pyrmont or Darling Point," the valuation firm said.
The properties typical of the downsizer market are often tightly held, causing increased competition when one is offered to market.
Investor activity is improving due to relaxing APRA regulations and decreases to interest rates.
However, the recovery occurring within this market segment is generally more limited, even more so within modern medium and high density precincts.
The report notes some aspects are having noticeable effects on certain areas however, for example, interest rate reductions appear to be encouraging more activity and price growth particularly within the owner-occupier inner east and inner west suburbs, however this has not been as noticeable within higher density investor-focused suburbs such as Zetland and Waterloo in particular.
The number of new unit developments has slowed, largely as a response to tighter finance for developers.
"Sales agents are also reporting limited numbers of buyers for off the plan units due to the loss of confidence in the construction of such complexes after multiple incidents of major defects across Sydney.
"That being said, many complexes are under construction with existing pre-sales and this relatively concentrated supply pipeline of generic or investor grade stock is also causing the recovery within this market segment to be slower," the valuation firm said.
The slow down within this market segment is driving larger developers (with more financial clout) to improve their product offerings, such as Crown Group which has placed significant emphasis on the architectural features of recently settled complexes in Green Square and the CBD.
Unfortunately some developers have been forced to cut costs and have delivered products that have underwhelmed their off-the-plan purchasers.
"Infrastructure projects are also significant within these areas; the recent completion of the light rail from Circular Quay to Randwick, which has caused an uptick in interest throughout the CBD and Surry Hills, is translating to higher auction clearance rates and price growth," the valuation firm said.
Furthermore this is spurring growth in the neighbouring bridesmaid suburbs of Redfern and Darlinghurst.
A two bedroom apartment has recently been sold for $875,000.
Located at 93/146 Pitt Street, the 96sqm apartment comes with open plan lounge/dining area, undercover balcony and kitchen with breakfast bar.
It's situated a stroll to village shops, bars and eateries as well as Redfern Station.
Furthermore, development around the Barangaroo precinct at the northern end of the CBD has improved the marketability of units in neighbouring Millers Point and Dawes Point.
The WestConnex Motorway project is also having some negative connotations for certain inner west suburbs such as Rozelle and Lilyfield in particular due to construction sites, interchanges, ventilation facilities and the unknown associated impacts for properties nearby.