October 2019

This is the 19th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Famine to Feast

According to Core Logic, December 1 marks the 5th month of housing values moving gradually upward since the downturn towards the end of 2017. Accumulatively over the last few months, these gradual increases have now put year-on-year growth back into positive territory for the first time since March 2018 @ 1.6%. While this relatively small amount may seem cold comfort to some, more impressive is that the respective Sydney / Melbourne market values for the quarter is 6.2% / 6.4%. There is still a way to till the market reaches the previous peak ( 8% / 3.7% ) for the 2 major capitals, however Melbourne at least is within sniffing distance.

For an easy to interpret visual representation, see this article on ABC.net.au.

In addition, in terms of affordability, over the quarter, it seems that much of the value increase relates to the upper, most expensive quartile of the market. This is reported to have increased in value 7.4% / 8.1%, whereas the lowest quartile (which is more likely to be invested in by first homebuyers) has had an increase 3.8% / 4.2%.

As the Sydney property market continues to power out of the downturn of the last 2 years, Core Logic reports on the current rate of recovery, that:

“If housing values continue to rise at the same rate recorded over the past three months, national dwelling values could reach a new record high in six months time.”

Whether this will in fact pan out is of course moot. Looking at indicators, the last weekend of November was the busiest weekend of the year for auctioneers with the largest amount of auctions nationally, and also in Sydney. Clearance rates as well are strikingly high, though final results are still being tallied at the time of writing.

Looking at the weekly clearance rate on The Real Estate Conversation, it’s interesting to note that not only were clearance rates lower 2017-2018, but also that the size of the market for the most recent weekend was also the largest for 2019.

Attribution: Core Logic

Analysts seem be unanimous that values are rising, with Kate Burke writing for Domain, reporting, even reporting at the end of October that “Sydney’s property market has recorded its quickest turnaround in decades, with house prices rebounding almost $50,000 last quarter.”

Figures show that prices have regained on average a third of the value lost during the downturn. Great news for investors, not so much for first homebuyers. Doron Peleg from RiskWise is paraphrased in The Real Estate Conversation as saying that this upswing meant “both Sydney and Melbourne would be back to square one when it came to housing affordability”.

However, other Core Logic data shown in The Real Estate Conversation shows that, with the notable exceptions of Sydney with a -1.6% decrease in affordability, Melbourne at -0.8%, and Hobart at -0.6%, affordability has generally improved to some extent across the country, compared to ten years ago.

It’s also worth noting that in an earlier post, Core Logic notes that affordability peaked in June.

Property repurposing

In other news, an article in Commercial Real Estate asks whether commercial gentrification may be on its way to Camperdown in the way already achieved in Surry Hills, Chippendale and Darlinghurst. The case in point is the old Dairy Bell building at 44-50 Australia Street. Purchased in 2015 when Dairy Bell closed its doors for the last time, the premises has been stripped back to a shell and the owner is looking for expressions of interest from potential tenants in the best way of completing the makeover.

The state of the inner west housing market is that even the most dilapidated house warrants its own article partially, we suspect, out of curiosity, partly out of disbelief. Domain discusses there is one going for auction in Summer Hill. If history is any indicator it will sell over reserve.

On the subject of ‘unique fixer upper’ real estate opportunities (albeit a little further from home), Nicole Frost writes for Domain that a former missile silo in the USA has been sold for just over half a million $AU. The purchase comes complete with metre thick concrete encasement, and rusting, inoperative 1960s technology. Perfect for preppers and/or wannabe evil overlords. The article doesn’t clarify but presumably the missile itself has been removed or at least rendered inert. Radiation poisoning from a deteriorating atomic warhead would not be great.

Fixer upper for <$1m in Sydney’s inner west!