How is the Sydney residential property market over $1.5 million tracking this winter? Settling down after a flurry.

June 27th, 2013

article_imageThis month our focus is on current trends in the Sydney residential property market over $1.5 million.

Owing to its having higher sales  volumes in that bracket  than Sydney’s other residential property regions, this article analyses activity in the inner eastern suburbs over the five weeks to 25 June 2013 with the idea of creating a representative sample from which to extrapolate underlying trends that might apply Sydney wide.

These were some of the trends:

  • Anecdotal evidence of a noticeable increase in turnover  in the bellwether suburbs of  Paddington and Woollahra  relative to any other period since 1 January 2013 – a conclusion supported by the transactions reported by the three major research houses which, although often unreliable  and incomplete, suggest that the increase in the past five weeks  in those suburbs may have been in the order of 25%.
  • With one or two exceptions, while buyers were out in force and bidding – especially for quality offerings typically  in short supply – activity at auctions and otherwise did not replicate the pre GFC frenzy. (One of those exceptions was 18 Milton Avenue, Woollahra which sold under the hammer on 20 June 2013 for $2.415 million; a hefty price per se for a knock down on a sloping block blighted by a sewerage stack at the rear and generous when compared to the $2.7 million paid  about seven months ago for the much more appealing 16 Milton Avenue, Woollahra next door). Instead and in what this article believes is an entrenched post GFC debt aversion in this bracket which explains the contrast with say, late 2007, most eastern suburbs buyers were as disciplined  as they were discerning (see below); steadfastly avoiding the temptation to go beyond carefully pre determined limits.
    The auction of 24 Faraday Avenue, Rose Bay on 20 May 2012 provided an insight into this dynamic. A well renovated north to rear property on a level  585m2 with nice touches such as a slate roof and copper guttering, its only real but still curable negative was a low risk development application next door and the absence of secure off street parking. As such, six determined parties bidding over $ 3 million  took  its sale price on the night to $3.296 million. Of particular relevance to the trend being discussed, is how they did it: whereas it took just seven bids and a few furious moments to raise the price by $435,000 to $3,235 million, it took nearly half an hour and  10 more bids for the auctioneer to extract another $46,000 from the floor before dropping the hammer.
  • Presumably because of the same debt aversion leading to far fewer margin calls than were made in early 2008, the pre GFC nexus that once existed  between the share market and the Sydney prestige property appears to be broken with serious buyers in this bracket being as unfazed by the concurrent share market correction and plunging Aussie dollar as they were by the RBA’s decision this month to keep interest rates on hold and the circus unfolding in Canberra.
  • Discerning buyers paid a premium for houses with relatively high land content and/or some rare feature such as dual street frontages, being opposite a park or freestanding.
    Being spread over a single level as opposed to the more usual dual storey was another such feature helping  24 Faraday Avenue, Rose Bay up the price ladder whereas the 392m2 and dual street frontages offered by 27 Chelsea Street, East Redfern (one of only three) partially explained the hefty  $2.58 million that property commanded at auction on 15 June 2013.
    Being freestanding and opposite a park explained the $1.96 million paid on 22 June 2013for the un renovated  20 Blandford Avenue, Bronte. In contrast, on the same day, the vendors of the nearby and attractively renovated semi at number 25 of the unattractive Battery Street, Clovelly sustained a net loss when selling for $1.855 million.
  • Bargains were to be found. One of the best occurred on 25 May 2013 when 9 Rowland Avenue, Bondi sold for $2.15 million. Not only was that $275,000 less than the $2.425 million those vendors paid on 31 October 2009, that renovated and extended property offered substantially more amenity than  7 Rowland Avenue next door which sold a month earlier for $2.1 million.

Conclusion

Following a flurry of activity last month and with exceptions that may be at the margins especially when rare quality offerings are involved, the Sydney housing market above $1.5 million may on this sample be starting to settle into  the  “trend housing price growth” identified by Dr. Luci Ellis as discussed in CurtiseCall May 2013. To check whether that proposition is right or not, this article will continue to monitor sales in Paddington and Woollahra over the next few months.