Market Correction

<html><body>
<div><span style="line-height: 1.3em;">There's a lot of drivel written about the supply response in Sydney causing a serious property market correction.</span></div>
<div> </div>
<div>It really depends on what property type and locations you're talking about.<br><br>
</div>
<div>Sure, I don't doubt that some of those buying new apartments off the plan in parts of the inner south will see prices fall.</div>
<div> </div>
<div>That's more or less certain to happen when the downturn phase of the cycle ticks around. </div>
<div> </div>
<div>There are some other areas where the market will be flooded by new apartments too, such as around parts of North Sydney.</div>
<div> </div>
<div>There's nothing new or surprising about this.</div>
<div> </div>
<div>But as an owner of property in a suburb like Pyrmont - where the supply of new sites has been totally depleted - it's hard to get too excited by the babble in the media.</div>
<div> </div>
<div>Prices in these parts will only be materially impacted by a lack of capacity to pay, which means very high interest rates (nah) or high unemployment (the unemployment rate in Pyrmont-Ultimo has increased from 2.8% to 2.9% over the past year).<br><br>A fair proportion of units are investor owned, of course, but in the current low interest rate environment cash flows are strong, while vacancy rates remain very low.</div>
<div> </div>
<div>
<div><strong><span style="text-decoration: underline;">Capped supply</span></strong></div>
<div> </div>
<div>To be quite blunt, it has long been obvious that property prices in Pyrmont would soar. </div>
<div> </div>
<div>With the population of Greater Sydney increasing by around 84,200 or so persons per annum - give or take - the demand side of the equation more or less takes care of itself in such a prime location suburb. </div>
<div> </div>
<div>As for new supply...well, there isn't any. </div>
<div> </div>
<div>There is none, because there is nowhere left to build.</div>
<div>
<br>Actually, strictly speaking that's not quite true.</div>
<div> </div>
<div>A <a href="/news">DA was lodged</a> to develop a few dozen apartments at 97 Pyrmont Bridge Road back in May 2013.</div>
<div>
<br>And down the road in the adjacent suburb of Ultimo there was a development application lodged in 2014 to build 50 apartments on Harris Street.</div>
<div> </div>
<div>So, there might be a very slight trickle of new supply in the area.</div>
<div> </div>
<div>
<div>But even though Harris Street is a pretty busy thoroughfare, land prices in these parts have been exploding higher over recent years, and ultimately the price of property is a derivative of the land that sits thereunder.</div>
<div> </div>
<div>The 485 Harris development fetched some $63 million, equating to a price per apartment of more than $1.25 million (in Ultimo!..on Harris Street!).</div>
<div> </div>
<div>So, no, I can't say I worry too much about the supply of apartments causing a price correction in Pyrmont.</div>
<div> </div>
<div>Now the South Dowling precinct on the other hand...the latest inner apartments report from BIS Shrapnel sums it up rather nicely.</div>
<div> </div>
<div><a href="/images/2015/08/06/BIS.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/08/06/BIS.jpg" alt=""></div>
<div> </div>
<div>
<div>Demand for apartments in Sydney from overseas investors in particular shows "little sign of abating", but there is plenty of supply due to come online in suburbs such as Zetland, Waterloo, Rosebery, Alexandria...and for that matter Mascot, Green Square et al.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Apartment completions</span></strong></div>
<div> </div>
<div>Inner Sydney apartment should average around 3,100 per annum over the next few years to 2018 per BIS Shrapnel.</div>
<div> </div>
<div><a href="/images/2015/08/06/BIS4.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/08/06/BIS4.jpg" alt=""></div>
<div>
<div>But the new supply of apartments in Sydney will be very much skewed towards the inner south and the old urban wastelands around Sydney airport.</div>
<div> </div>
<div>49% of the new inner Sydney apartments will be in the South Dowling precinct, as compared to just 1% in Pyrmont.</div>
<div> </div>
<div><a href="/images/2015/08/06/BIS2.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/08/06/BIS2.jpg" alt=""></div>
<div><span>Or, to put that graphically:</span></div>
<div><span> </span></div>
<div><a href="/images/2015/08/06/BIS3.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<div><span> </span></div>
<div><span><img src="/images/2015/08/06/BIS3.jpg" alt=""></span></div>
<div> </div>
<div>
<div>Much of property investment is about common sense. </div>
<div> </div>
<div>Invest in the areas where people really want to live but where there is nowhere left to build new supply. </div>
<div> </div>
<div>Unfortunately too many people do precisely the opposite by investing in areas where people don't really want to live and where there are stacks of sites on which to build.</div>
<div>
<br>Same applies in Brisbane by the way!</div>
<div> </div>
<div>Check out the full BIS Shrapnel report <a href="https://www.theurbandeveloper.com/wp-content/uploads/Inner-Sydney-Apartment-Market-Brief-July-2015.pdf" target="_blank">here</a>. </div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</div>
</div>
</div>
</div>
</div>
</body></html>

pwargent-M4siyDbqQY

A lot of drivel written about Sydney's supply response: Pete Wargent

<html><body>
<p>Every time the Australian economy delivers a lacklustre growth data just like clockwork we start hearing that we can expect another correction in real estate prices as we are now fast tracking an inevitable recession – all a distinct possibility.</p>
<p>How quickly some forget that Australia has now successfully completed a record 24 years of consecutive economic growth. As is the case in Australia where real wages are down this is a global problem where I foresee that the household sector will struggle with the declining weak wage results. This is further evident with the data release this week identifying GDP growth for 2014/15 came in at 2.4% and nominal GDP growth at 1.8% for the 2014/15 financial year, which is the weakest growth in nominal GDP since 1961/62.</p>
<p>As a result of the wages decline what is even more alarming is when one examines stock levels we are witnessing the lowest ever levels despite a record low cash rate. For example, Mosman has 5,890 houses with just 63 on the market today which represents 1.069% of properties on the market and which is also quite common for the vast majority of Sydney suburbs.</p>
<p>Too many are sugar – coating the Sydney property market by focusing on the Sydney median house price, which keeps increasing, and not looking at the grass – roots property market by analysing individual niche market performances which paints an entirely different proposition. When you have individual property markets posting record low stock levels it’s hardly likely we will see significant price growth which is exactly what we are seeing today.</p>
<p>The reality being in Mosman is that presently we have 1.069% of vendors on the market with the remaining 98.931% of property owners not wanting to sell despite a record low cash rate that will almost certainly go lower in 2016. Much of the problem relates solely to job security where individual households are refusing to take on more debt which then has the markets flatlining.</p>
<p>Going on past market corrections which were brought about by unprecedented high turnover of properties by households which has not been the case in the majority of instances. We have seen unusual high turnover of properties by investors to the extent that we are now seeing parity being reached between tenants and investors in terms of rent. That’s good news for those renting given it appears that rental growth has peaked in Sydney where in some cases we are now seeing an oversupply of properties for rent.</p>
<p>This is a positive for the economy given the general rule of thumb is one – third rent, the next third own with a mortgage and the final third own with no mortgage. So it appears now that the Sydney investor market has peaked and we can now expect to see some tapering of prices as investors chase new market opportunities. Brisbane is the stand – out so we expect to see investors jumping all over that market from here on. In the perfect property world this is exactly how investor machinations should operate with Sydney and Melbourne peaking and entering re – calibration mode.</p>
<p>Another interesting thing to look out for is the Sydney vacancy rate which we expect to see grow significantly given the enormous investor movements across Sydney. We can also expect to see some investors flipping investment properties by taking their profits and then re – investing in the new growth markets where depending on when they bought into the market there have been very strong capital appreciation generated.</p>
<p>When the Australian economy produces a poor report card this then forces our elected politicians to concentrate on the much needed reforms that must be implemented as we are now twelve months out from the next Federal Election.</p>
<h5>MOSMAN – 2088</h5>
<p>• Number of houses on the market this time last year – 80</p>
<p>• Number of houses on the market last week – 65</p>
<p>• Number of houses on the market this week – 66</p>
<p>• Number of apartments on the market this time last year – 61</p>
<p>• Number of apartments on the market last week – 42</p>
<p>• Number of apartments on the market this week – 49</p>
<h5>CREMORNE – 2090</h5>
<p>• Number of houses on the market this time last year – 5</p>
<p>• Number of houses on the market last week – 4</p>
<p>• Number of houses on the market this week – 4</p>
<p>• Number of apartments on the market this time last year – 15</p>
<p>• Number of apartments on the market last week – 18</p>
<p>• Number of apartments on the market this week – 19</p>
<h5>NEUTRAL BAY – 2089</h5>
<p>• Number of houses on the market this time last year – 10</p>
<p>• Number of houses on the market last week – 2</p>
<p>•Number of houses on the market this week – 5</p>
<p>• Number of apartments on the market this time last year– 29</p>
<p>• Number of apartments on the market last week – 30</p>
<p>• Number of apartments on the market this week – 35</p>
<p>For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate.</p>
<p><em><span>ROBERT SIMEON</span> is a director of </em><em><a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> </em><em>and has been selling residential real estate in Sydney since 1985. <br>He has also been writing real estate blog </em><em><a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> </em><em>since 2000. </em></p>
</body></html>

robertsimeon-hRNTwJyXkQ

Why property markets just got a lot more interesting: Robert Simeon

<html><body>
<p>The latest CoreLogic home value data shows the national housing market moving out of its correction, led by Sydney and Melbourne, according to Moody's Analytics.</p>
<p>The national index for home values has fallen for almost two years but now house values have begung to rise starting in the September quarter.</p>
<p>National house values are on track to fall by 7% in 2019, before rising by 5.4% in 2020. Apartment values are forecast to fall by 3.8% in 2019, before rising by 5.1% in 2020.</p>
<p>The RBA has reduced the cash rate by 75 basis points so far this year to 0.75% and a further 25-basis point reduction is expected for early 2020, according to Moody's Analytics.</p>
<p>Katrina Ell, Economist at Moody’s Analytics said that for 2019 and 2020 Moody's has individual City and state forecasts, "drilling into the details, house values across Sydney are on track to fall by 8.4% in 2019, before a forecast 7.7% expansion in 2020. Apartment values are set to decline by 5.9% in 2019, followed by a forecast 7.9% expansion in 2020."</p>
<p>"House values began rising from July, while apartment values began improving from June."</p>
<p>"House values in Melbourne are set to fall by 9.2% in 2019, building on the modest 0.3% decline in 2018. Like Sydney, the correction has largely passed and house values are forecast to rise by 7% in 2020 and a further 7.8% in 2021," she said.</p>
<p>"House values in Brisbane will see a modest full-year correction in 2019, with values estimated to fall by 1.8%, with particular weakness in South Brisbane house values. A relatively mild correction is forecast for apartment values in 2019, with a 1.3% forecast decline in 2019, following a 1% fall in 2018. This year is predicted to be the worst for Brisbane’s apartment market before it transitions to a projected 5.4% rise in 2020."</p>
<p>"House values in Perth will likely decline 7.8% in 2019, followed by a further 0.7% decline in 2020. Meanwhile, Adelaide’s housing market will continue its stable run, with house values forecast to fall by a modest 0.5% in 2019 after a 1.9% gain in 2018."</p>
<p>"House values in Hobart are on track to grow by 4.1% in 2019 and a further 1% in 2020. Similarly, the Hobart apartment market will likely decelerate from 12.2% growth in 2018 to 2.7% in 2019, before a small 0.4% drop is forecast for 2020."</p>
</body></html>

j.ballantyne1990-6AQqhLzZaK

The housing market correction has passed: Moody's Analytics

<html><body>
<p><span><span>EXPERT OBSERVATION</span></span></p>
<p><span><span>While Sydney and Melbourne remain at the centre of the current housing correction there are some significant differences between the two, in terms of the timing, scale and spread of price declines.</span></span></p>
<p><span><span>Melbourne’s price correction started later in the piece but has gathered pace since mid-2018. Prices are now down 8.7% from their peak but have been tracking closer to a 10%+ annual pace of decline over the last 6mths.</span></span></p>
<p><span><span>Notably, the price correction has shown much bigger differences across segments and tiers. For Sydney, there is about a 4ppt wedge between price declines across houses and units, and across different market tiers. For Melbourne, it’s a much larger 8-12pt wedge with units and bottom tier areas holding up much better (indeed, prices across the bottom 25% properties are essentially flat).</span></span></p>
<p><span><span>This theme is also apparent across sub-regions. The big movers over the second half of 2018 were Melbourne’s Inner East and Inner South, with the Inner City and West holding up considerably better. Prices are also performing better across the regional Victoria.</span></span></p>
<p><span><span>Some of this difference may relate to differences in the supply-demand balance across part of Melbourne. Overall, the city’s rental market remains tight with vacancy rates holding around 2%. However, parts of the city are seeing a significant surge in apartment completions, from around 10k a year mid-decade to 17-18k a year currently. </span></span></p>
<p><span><span>Meanwhile, rental vacancy rates are extremely tight across Victoria’s regions, having fallen from 2% in late 2017 to just 1.2% in early 2019. This in turn suggests the uneven performance is likely to continue.</span></span></p>
<p><img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/2019-02/Housing-pulse-bite-2019-02-6.jpg" alt="">  </p>
<p><em>MATTHEW HASSAN is a Senior Economist for Westpac</em></p>
</body></html>

Matthew_Hassan-HHWHptmrw4

Melbourne's uneven price correction: Matthew Hassan

<html><body>
<p>One of the world's largest fund management groups has disputed suggestions about a collapse of the Australian residential property market.</p>
<p>Vanguard, which has $7 trillion under management globally, claims slowing residential property market is unlikely to turn into a sharp downturn that could derail economic growth. </p>
<p>Vanguard says there is only a low risk of a sharp correction.</p>
<p>The US funds house conducted an in-depth analysis of four of the world’s largest and most developed housing markets.</p>
<p>It found that Australia and Canada stood out because of their high cost of housing and high levels of household debt, even compared to the US and Britain.</p>
<p>The house price to income ratio in Australia for the quartile is the highest ever, while household debt to GDP is ­approaching an all-time high of 122%.</p>
<p>Vanguard determined that Australia’s housing market rally had “exceeded expectations” ­beyond traditional measures of housing demand versus supply, interest rates and foreign investment.</p>
<p>However, the fund manager’s economists considered there was a low risk of falls causing a ­recession in all markets studied, including Australia.</p>
<p>“A big unknown is how households deal with their high debt given the slow income growth in Australia, however, and this will be a large factor in what transpires in Australia’s housing market,” Vanguard economist Matthew Tufano said.</p>
<p>“However, the large pipeline of housing — mostly apartments — coming into the market in Australia could effect a more gradual moderation in house prices, rather than a sharp ­correction.”</p>
</body></html>

Market Correction

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Market Correction

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News