18 Jun Sydney property prices bomb as Hobart continues to boom, says HTW report
It’s been a turbulent six months as the nation’s real estate engine rooms begin to slow despite the Reserve Bank of Australia keeping the brakes on cash rates. An analysis of the first half of the year shows apartment prices in western Sydney are bombing as house prices in Hobart boom.
Off-the-plan apartment buyers in Sydney’s west are selling below their purchase price as rising costs, falling prices and, in some areas, oversupply erode market sentiment. Darwin and Perth continue to struggle, says property surveyor Herron Todd White, with mortgagee-in-possession auctions increasing as borrowers default on repayments and lenders take possession and sell the property.
Another one-time property price leader, Melbourne, is also beginning to splutter as Adelaide steps up a gear, albeit off a lower base.
HTW’s capital city experts were asked to assess their markets and provide some insights on what the remainder of the year is likely to look like.
In Sydney, there are still hotspots among the nation’s premiere postcodes in coveted locations. Apartments purchased off-the-plan four years ago for about $670,000 in popular Parramatta, about 36 kilometres north-west of Sydney’s CBD, are selling for around $630,000, says Shaun Thomas, residential director of HTW.
There are still hotspots among the nation’s premiere postcodes in coveted locations, with prestigious harbour views, proximity to the city centre and all amenities, particularly good transport and schools. “But generally the wider market has cooled with transaction numbers falling, selling periods extending and prices declining,” says Thomas.
Dwelling prices have dipped by more than 1 per cent during the past three months and more than 4 per cent since their July 2017 peak. In parts of western Sydney they are down by nearly 7 per cent. Inner Sydney, home to some of the world’s most expensive real estate, continues to perform well even if auction and clearance rates are returning to their long-term averages of about 60 per cent.
“We are in a different part of the property cycle,” says Thomas. “There is likely to be a contrast in the performance between good quality properties and inferior alternatives.”
Melbourne has eclipsed Sydney as the nation’s worst-performing capital with prices falling by about 5 per cent in recent months, according to recent analysis by investment bank Morgan Stanley. “We expect the inner [bayside] suburban property market to stabilise,” says HTW director Perron King.
Prices for inner Melbourne apartments and some eastern suburbs, such as Nunawading, Mitcham and Blackburn, could fall as a large number of “off the plan” dwelling is completed. Inner-ring suburbs well serviced by public transport and schools continue to sell.
High prices in the south-eastern suburbs have forced out many buyers and are expected to encourage development of affordable apartments, says King.
Brisbane apartments have plunged by about 20 per cent from their peak, according to CoreLogic, which monitors residential prices. “The popularity of our ‘relatively affordable’ inner city suburbs with “affordability migrants” – those who move from more expensive states – has not extended through to the further flung suburbs,” adds David Notey, an HTW Brisbane director.
Notey says Brisbane has failed to live up to price growth expectations during the past six months. “Detached housing remains a firm favourite among Brisbane buyers and the flight to quality that always comes in slow markets continues to be a feature,” he says. Strong supply in outer suburbs has kept a lid on prices.
“Smart detached housing investors will avoid secondary locations. There is resistance from buyers and they usually only perform at their best when a boom is under way,” he says. Developers are offering potential apartment buyers incentives, from rental guarantees to discounts and vouchers for appliances, in a bid to seal deals.
“Impacts of oversupply have come home to roost,” says Notey. “Prices for units are down, tenants are being encouraged to stay and new projects that have not been started are being land-banked,” he says. This is weakening demand for second-hand apartments and townhouses.
Demand for housing is broadly resilient but showing some signs of slowing from recent highs, says HTW associate director Angus Howell.
“Property that are passed don’t sit on the market for long,” Howell says. Recent completion of apartment complexes is sating demand, particularly for smaller one- and two-bedroom offerings.
“The apartment market will be the one to watch,” he says. “If current absorption rates, backed by good population growth, continue then the market will cap off what has been a good year,” he says.
Strong sales and rental growth is making Hobart the capital with the fastest-growing prices, with double-digit returns for inner and middle ring suburbs during the first six months, according to Andrew Peck, HTW Tasmanian director. “Both house and apartment markets continue to be fuelled by a lack of stock,” Peck says.
Residential housing remains flat, particularly in the outer suburbs, despite some improvement in areas attractive to upgraders, such as families, targeting the prestige market. Median house prices have fallen about 2 per cent. There has been a two-fold increase in mortgagee-in-possession sales in lower priced, outer suburbs where there is an oversupply, such as Baldivis and Ellenbrook.
“The market has tracked as expected with minimal growth, some stabilisation in certain sectors and others have not fared well,” says Will Johnson, HTW Darwin director. Confidence is growing at the top end of the market with the first $1 million residential sale in nearly five years.
Johnson believes the housing market has returned to about 2008-09 levels, or about 20 per cent to 30 per cent up from recent lows.
“The unit market continues to struggle,” he says. “Potential purchasers are aware of the state of the market and are constantly looking for a bargain.” There has also been a spike in mortgage-in-possession sales.