July 2018

This is the third summary covering news and happenings in Sydney real estate, and more broadly.

It's a good time to buy

This month in Sydney’s real estate sees a minor – and perhaps temporary – reprieve from falling property sales, but industry pundits overall point towards a large-scale correction on a number of fronts.

In regards to the construction sector, the ABC reports that BIS Oxford Economics have predicted “the biggest correction since the global financial crisis” with new housing builds falling by an estimated 23% in the next 3 years. This reduction would be predominantly felt in higher density areas where a boom in unit construction has been the norm over the last few years.

The associate director of BIS, Adrian Hart, has said, “What we’re seeing is that what goes up tends to come down. It is a bust in residential apartments in the high density segment. But you have to look at how far it’s come up,” Mr Hart said.

He further notes that changes to banking that place stricter limits on borrowers, and the Foreign Investment Review Board and ATO clamping down on overseas buyers are prime reasons for this downturn.

Housing Affordability

The Real Estate Conversation reports another in the ongoing trend of more sluggish auction clearance rates, symbolised by the pass-in of two high profile properties. This type of occurance is demonstrative of the overall changes in the market; high-end properties aren’t selling, and entry level ones are. The Core Logic statistics for the final week of July showed the clearance rate at a slightly more optimistic 56.6% than at any time since mid May.

However, compared against the statistics from the same time last year another story is apparent. In 2018 the Sydney auction market is also roughly two thirds the size of 2017. Last year the total number of auctions for the same period was 714, this year it is 465. Not only has the market shrunk significantly, but there are less sales overall. Last year the clearance rate for the same period was 65.4%. Canny sellers, the Real Estate Conversation suggest, might be deciding to hold off until things improve, and the reduction this is causing in the market place may be having the knock-on effect of reducing options for potential buyers – thus compounding the problem.

Bondi in the early morning

End of Financial Year Results

Being the end of the financial year, Core Logic has reported its year on year changes. These include that the Sydney and Melbourne markets – more than other centres – are starting to be affected by affordability problems. They report that this is demonstrated in the market by an overall reduction in the overall value of the most expensive properties by 3.6%, while the most affordable segment has seen a modest rise of 1.4% in value. The values of the upper quartile in Sydney alone have dropped by 7.4% with Melbourne a much more modest 2.5%.

Sydney, it seems, is the main centre now starting to drag on the the property market across the country on a number of metrics. Sydney properties are staying on the market 12 days longer than a year ago (the largest drop of any capital city), and vendors are offering the third highest level of discount (1.6%) after Darwin (2%) and Canberra (1.7%) when compared against last year’s figures.

In fact, over the 2017-18 financial year Sydney dwelling values fell by 4.5%, which is according to Core Logic the ‘largest financial year fall on record’. All things considered however, this comes after a 16+% rise in the previous 2016-17 financial year. With these peaks and troughs considered, Sydney properties are still worth 54% above what they were 5 years ago.

Source: Core Logic

Getting into the Market

Domain has published results of a University of Melbourne study that shows especially for younger Australians – but also across the whole age spectrum – the possibility of owning a home is becoming a dwindling dream.

Dr Chris Martin from UNSW’s City Futures Research Centre said long-term housing trends in Australia included that the renting demographic would become further entrenched.

“The private rental sector is growing and it’s the only growing part of the housing system,” he said.

Overall, latest data to hand is that the Sydney market – and Australia as a whole – is starting to go through a transition to where the property market may look somewhat different to what it does now.