"Summer of love for first home buyers and investors": Five minutes with Ray White Projects Western Sydney's Mark Bernberg
First home buyers and investors are driving the demand in the apartment market in Sydney's western suburbs.
That's what Ray White Projects Western Sydney Managing Director Mark Bernberg, who has seen the market go back and forth in 2022, recently told Urban.
He's calling it the "summer of love" for the two buyer camps.
"First home buyers are taking advantage of the generous government incentives, opting either for the government's stamp duty concessions, or choosing to pay a land tax rather than stamp duty all together," Bernberg says, adding that investors are also well and truly back in the market after a hiatus over the last few years.
"Investors are acting on the current rental crisis which is happening Sydney-wide. They're coming into the market in the knowledge that when projects are complete, they'll be seeing considerably stronger yields than they ever have before."
Sydney was the only capital which bucked the trend of quarterly rental growth decline, according to CoreLogic. Sydney recorded a new cyclical peak of 43 per cent over the three months to October, thanks to the strong return of overseas migration.
Demand for first home buyers and investors was obvious in the Castle Hill apartment development Castle Island by KWG (pictured main), where Ray White Projects sold out all of the one-bedders in the project in double-quick time.
Castle Island
The demographic Bernberg is seeing less of is downsizers, who were prominent at the start of the year, but are now starting to reconsider their options as the established housing market continues to dip.
"The majority of downsizers are feeling like they missed the boat to sell their current family home for a premium when prices were at an all time high earlier this year," Bernberg suggests.
He is still seeing some activity in the downsizer market, from those who believe the market could scale back another 10 to 15 per cent and they want to sell sooner rather than later.
Bernberg, who helped set up Ray White's new projects division in Western Sydney earlier this year, believes apartments will outperform houses over the next 12 to 18 months.
"The apartment market as an asset class has everything going for it," Bernberg says.
"Apartments are more affordable than houses, yields are considerably better, there's never been more government incentives in place , and migration is starting to climb."
Demand has bounced around in 2022, which, rather than a tale of two halves, has almost been a tale of three thirds.
"We started the year with real positive momentum. Even in the early stages of the RBA's interest rate hikes, we were still seeing good enquiry and transacting well," Bernberg says. There was considerable success particularly at RWPWS's Jordan Springs project Kala, just outside of Penrith.
The strong start to the year began to fade however across the board, as it often does heading into winter, but Bernberg said this winter was different to any other.
"We were into the fourth, fifth and sixth interest rate hikes over what is always the quietest time of the year every year, so prospective buyers were holding off committing to a purchase as they waited to see when the RBA would stop lifting rates."
Despite the expectation the RBA will continue to hike rates into early 2023, Bernberg said that as soon as the sun started shining, buyers were back out in force.
"It was almost like a switch was flicked around September where buyers were starting to come back out. They were starting to see an end in sight for the rate rises, and were able to factor that into their spending. They also wanted to lock in their approvals and purchases before rates continued to climb and their borrowing capacity shrunk further."
Bernberg says there's a complicated gap at the moment in the off the plan space, which is being driven by the increased cost in construction.
"In a market downturn, developers would often shave a bit off the price of the apartments in their development," Bernberg states. He adds however that developers just can't
"Given the rising costs of labour and materials, they can't offer sweeping discounts or they won't be able to make the project stack up financially.
"Some prospective buyers are getting some joy in negotiating prices. They're looking for what they deem to be a bargain. If there is wiggle room, and they feel like they're able to get a couple of percent off the original asking price of the apartment, then they're happy to transact and everyone's a winner."