City Beat August 2023: Downsizers fuel Sydney's off the plan apartment market
The growth in the Sydney unit market looked like it had started to slow in July, following booming gains earlier in the year.
Growth slowed to a still respectable 0.7 per cent, but that followed gains of 1.2 per cent in June and 1.8 per cent in May.
But the latest update in property data analytics firm CoreLogic's Monthly Hedonic Home Value Index showed solid growth of one per cent over August, taking units to a new median $822,000.
Sydney unit values (which includes apartments and townhouses), are now 5.2 per cent up over 2023 and 1.1 per cent compared to this time last year.
Nationally, August marked the sixth consecutive month of housing value recovery.
CoreLogic Research Director Tim Lawless noted the trend in housing values, although generally positive, is diverse.
“Sydney has led the recovery trend to-date with a gain of 8.8 per cent since values found a floor in January this year. Brisbane has also posted a strong recovery with values up 6.2 per cent since bottoming out in February."
Stock levels across Sydney rose in August, up nearly 10 per cent, but they remain lower than they were a year ago.
What's happening in the Sydney off the plan market?
Agents are reporting higher demand as we approach the back end of the year, across various different pockets of Sydney and Newcastle.
It's the premium apartments which are selling well, generally because they tend to be bought by downsizers and empty nesters, who either don't require any finance, or not as much, compared to a first home or next home buyer.
McGrath Projects Associate Director Adam Sparkes, who is marketing Grand Reve in Castle Hill, has seen the most recent enquiry coming from well qualified buyers with an intent to purchase.
"We’re getting good enquiry for the over-sized large premium apartments at Grand Reve in Castle Hill, but we’re running low on supply," Sparkes says.
"Buyers looking at our three bedroom plus studies, four bedrooms and penthouses are typically downsizers, most of whom own their homes outright. This particular group of buyers are not affected by the RBA as closely as first home buyers or up-sizers might be."
Interestingly Sparkes is also fielding interest from Australian expats who are seeing value in the Hills area.
"One of our most recent purchasers, a couple living in Singapore, have bought a large two bedroom plus study apartment which may serve as an investment on completion, and longer term as a new home when they return to Sydney. Buyers are now seeing a completion date roughly 12 months from now, and they’re able to work toward that timeline a little easier than they would when construction completion is forecast years from now."
Colliers Director Residential Peter Kerras has found the same levels of demand at the premium end of the market.
"The strong results we’ve seen at Newlands in St Leonards and Newmarket in Randwick are based off low supply and the significantly high house prices in the Lower North Shore and Eastern Suburbs," Kerras says.
Kerras says it's remarkable how resilient the market has been, despite the recent month-on-month rate rises.
"Buyers are now more concerned about where they are going to live. The huge jump in rents across Sydney has fuelled buyer demand, and the first home buyer scheme and NSW Shared equity scheme have assisted this."
Kerras is expecting spring to be busy, with Colliers handling new releases at Alkira Asquith, the final release in the Woolooware Bay masterplan, and The Glade release at Newlands in St Leonards, all of which are set to fuel demand.
It's the same view from the Colliers Newcastle team, with Peter Macadam saying over 2023 he's typically seen buyers downsize in this market.
"Announcements from developers around planning status and constructions contracts will act as further stimulus for projects in Spring, whilst downsizers will be buoyed by the positive impact of the general residential market throughout that period, Macadam says.
Investor interest has been strong, Macadam says, based on the low 1.5 per cent vacancy rate in Newcastle, which is outperforming Sydney's 1.6 per cent vacancy.
"While enquiry level has reduced from the peak, the qualified buyers are still moving forward despite the higher interest rate environment," Macadam adds.
Colliers is set to launch a new project of 230 apartments during spring, pending final development consent by the local council.