The Sydney property market: The devil is in the detail

The Sydney property market: The devil is in the detail
The Sydney property market: The devil is in the detail

The ‘Sydney Property Market’ is often referred to just like that:  a three word headline meant to encompass all suburbs, properties, demographics, sales and rentals. It’s about as realistic as saying that all Australians are called Barry, drink beer, love sport, wear bucket hats and zinc cream.

I mention this because I was talking to our leasing team last week about the impact of the sustained strength in the sales market on rental availability. It would be easy to say that it’s great out there right now but beware of the blanket generalisation.

With investors so active in the current market there is an expectation that more rental properties will become available, easing what has been reported as a ‘rental crisis’ across the city.

Yes that is the case, but it isn’t that simple. It continues to be very patchy and as always it comes down to the maths. The devil is in the detail.

Along the north shore there is a steady stream of new build developments coming onto the market which has expanded the supply of rental properties available. Demand is there but with such a selection available the rental returns have become more competitive. Landlords will secure a tenant if they pay attention to the market and price it right.

In other areas, specifically around the CBD and fringe suburbs investors are certainly active but the price premium for a CBD property is reflected in rents which in turn has an impact on the level of demand.  

Again, even at the premium end of the market landlords need to be mindful to price their property correctly.

Anyone who has studied even basic economics would know the principle of supply and demand. As one increases – the other decreases until a point of equilibrium is reached. Which is why the numbers delivered in the current property market are so extraordinary.

The Cooley Index for February reveals some amazing statistics: A total of 302 properties going to auction with an average of 5.5 registered bidders delivering a clearance rate of 81% and 76% selling above reserve. Wow!

Now look at those numbers in comparison to the same period last year when there were only 171 properties taken to auction with a 68% clearance rate and 59% of those achieving prices above reserve.

What we’re seeing is an increase in supply as vendor confidence in the sustainability of the market has grown.  And rather than dilute demand the additional listings have been met by stronger buyer interest.

The number of registered bidders at auction is another interesting gauge of market strength. While there can only be one buyer the fact so many parties are revealing a very serious intent to purchase bodes well for the months ahead. That’s because losing bidders don’t automatically drop out of the market, rather they remain on the hunt, more determined to secure the next property.

It seems everyone is coming out to play.

 

Ewan Morton

Ewan Morton

Ewan Morton is managing director of the Sydney based Morton & Morton.

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