New first-home owner grant to add momentum to Sydney unit market upswing: PRDnationwide

The Sydney unit market is heading into an upswing and is ahead of the detached housing market on the property clock, due to increased competition and tighter inner-city vacancy rates, according to PRDnationwide NSW research analyst Oded Reuveni-Etzioni.

Reuveni-Etzioni places Sydney units at 6.30 on the property clock, indicating the market is starting to rebound, with Sydney houses at 6 o’clock, indicating that the market has bottomed out.

• At 12 o’clock the market is at its peak (demand exceeds supply)
• At 3 o’clock the downswing has set in (an evenly supplied market)
• By 6 o’clock it has bottomed out (an oversupplied market).
• At 9 o’clock the market is rebounding (supply tightening)

He says that the new $15,000 first-home buyers' grant, which kicked in on October 1 and is only available to those buying or building a new home, will drive increased activity in what is already a competitive unit market in the inner city suburbs.

“Off-the-plan enquiries have slowed over the past three months but buoyancy is expected to return in October, with first home buyers taking advantage of the new first-home owner grant (new homes).

“First-home buyers are finding it increasingly difficult to compete with overseas investors for affordable product in the CBD fringe and lower north shore.

“Instead they opt for buildings located in south Sydney, St George and western Sydney.

“Second-home buyers and downsizers are using equity built in their previous property to buy units in middle and high price brackets.”

According to Reuveni-Etzioni, investors have been targeting the lower end of the market, purchasing studio and one-bedroom units, with re-sales often occurring close to the date of completion.

“The level of units advertised for sale is similar to this time last year, as new units compete with older stock for buyers.

“Overall vacancy remains tight, although anecdotal evidence points to stabilising rent prices in several inner-city locations.

“Vacancy in some middle ring suburbs has increased, with tenants moving west or away from the metropolitan region in search for lower rents,” he says.

August vacancy rate figures compiled by the Real Estate Institute of NSW  show a 1.8% vacancy rate for inner Sydney (where units predominate), with higher vacancy rates in the middle suburbs (3%) and outer suburbs (3.1%).