Sydney remains the top city for strongest and enduring property market: McGrath
Sydney remains Australia’s strongest and most enduring property market, according to McGrath's latest report.
It's powered by long-standing fundamentals of undersupply and population growth, providing every type of lifestyle possible including beachside, harbourside, CBD living and suburban neighbourhoods for almost 5 million residents.
"Sydney real estate is like gold and in my opinion, despite the phenomenal boom of 2012-2016, Sydney property prices will continue to rise," the report stated.
Latest figures from CoreLogic RP Data tell us that Sydney property prices have risen 64% in four years.
This is spectacular growth and well ahead of the second best result in Melbourne at 44%.
For many Sydney property owners, the boom has delivered extraordinary gains for those in the market. But how do you best capitalise on this newfound wealth?
Meantime, the market is showing signs of plateauing but price growth has continued due to a significant undersupply of stock and strong demand buoyed by further falls in interest rates.
According to CoreLogic RP Data, the pace of price growth in Sydney has halved this year but median property values are still up 12.8% to $880,000 for houses and 7.5% to $665,500 for apartments over the first eight months of 2016. Pretty impressive for a slowing market.
Record low listing numbers have contributed to very strong auction clearance rates between 70% to above 80% all year.
Local upgraders have been the greatest buying force, aiming to use new equity to upgrade their homes and potentially refinance while interest rates are so low. However, fear of selling and not being able to buy back in is resulting in a determination to buy first, so stock remains low.
Many would-be upgraders are staying put and renovating instead, with Sydney and Melbourne owners spending more than twice the money of owners in other capital cities, according to the ABS and Domain research.
While investors are still out there, we have definitely noticed a drop-off due to tighter lending criteria. The APRA-led changes introduced in early 2015 aimed to limit growth in the banks’ property investment lending to less than 10% per year and this has now been achieved.
The top end of the market improved this year. The lower dollar has encouraged expats and foreign buyers; and locals who purchased wisely post-GFC are now looking to cash in and upgrade.
In Sydney, Eastern Suburbs owners who bought in the $2 million-$4 million bracket are now selling for $7 million and upgrading to $10 million. In the Lower North Shore harbour suburbs, young families are selling for $4 million -$5 million and upgrading to $8 million-$10 million.
Affordability remains an issue across Sydney. The traditional migration west for cheaper housing continues, with the greatest population growth over the next 20 years expected in Camden, Parramatta, The Hills and Liverpool regions, according to new figures from the NSW Department of Planning.
However, limited greenfield development space on Sydney’s western fringe means we need to get creative in housing a predicted 1.7 million new residents over the next two decades. Among the options is subdivision of traditional blocks in established suburbs to enable more terraces, townhouses and dual occupancies; and more high rise apartment living around suburban CBDs.
Meantime, a growing cohort of young families are leaving Sydney altogether in favour of affordable lifestyle locations, with ABS figures showing the most popular spots are the Richmond-Tweed region, Mid-North Coast, Central Coast and Hunter Valley.
Chinese buyers remain a force in Sydney, however new fees levied by both federal and state governments on top of tighter lending criteria for foreigners has resulted in reduced demand and settlement risk on new apartments.
There’s a two-year pipeline of 82,000 new apartments to be completed in Sydney, according to CoreLogic RP Data. To put that in perspective, 43,500 apartments are sold in Sydney per year but that includes established apartments, which represent a bigger share of the pie.
This wave of new supply will be concentrated around the inner city and suburban employment and shopping hubs such as Strathfield, Parramatta and Ryde.
This is where young people want to live and over the next few years, they will be spoilt for choice and finally have some negotiating power on their side.
We see a bright future for the Sydney property market. There is plenty of long term price growth ahead even as we approach a major affordability hurdle for younger buyers today.
We believe the burgeoning global audience for Sydney real estate will be a key contributor to future price growth; and the long term stability of the market and opportunity to create significant personal wealth will sustain the aspirations of Sydneysiders to own their own homes for generations to come.
John McGrath’s top picks:
1. Canterbury
Once an average suburban precinct best known for its equine interests; Canterbury is fast becoming an Inner West bolthole attracting young families and professionals alike. Buy, sit and watch your asset grow in value.
2. Hunters Hill
We still can’t work out why the values here for some of the country’s best real estate are materially below her peers in the East and North? This attractive garden enclave is private and discreet with beautiful homes and perfumed gardens. If you want to see some of the best homes in the country, you better check it out.
3. Rouse Hill
Follow the money. At the minute it’s all heading to the North West ahead of the soon-to-be-completed new rail line. The surrounding areas are equally as attractive for both lifestyle and capital growth but the Rouse Hill Town Centre is worth seeing for that address alone.
4. Sans Souci/Dolls Point
Surrounded by water and with all the appeal and benefits of Sydney’s southern suburbs yet only minutes to the bay and airport with easy access to the CBD. Leaves little doubt that this area will continue to be one of the most desirable in Sydney.
5. Forestville
This has been a favourite suburb for several years now. If you crossed the leafy North Shore with the vibrant Northern Beaches, Forestville would be the outcome. Relatively easy access to the CBD, just 7 minutes to the surf and surrounded by trees, its ideal for homemakers.