The Sydney residential property market – 2011 market wrap and predictions for 2012 as Europe holds the key above $1 million

December 31st, 2011
euro debt crisis protestors in silhouette with euro sign

euro debt crisis protestors in silhouette with euro sign

Mainstream commentators this month described Sydney’s property market as having run out of puff despite and as predicted in CurtiseCall’s December 2010 market wrap, cuts in the official interest rate. This conclusion was based largely on so called “plunging” auction clearance rates recorded by Australian Property Monitors during the three Saturdays of this month before Christmas Eve with the following extracts from Dr. Andrew Wilson’s weekly article in the Sydney Morning Herald on 19 December 2011 being typical of such commentary:

  • “…buying activity [was] in full retreat over the past month”…
  • “…[with] the continued stagnant nature of the prestige property market…the market is being supported by significant numbers of first home buyers”…

However, this article’s analysis of the data from the same source for the corresponding weeks last year (summarized in the following table) combined with the in market experience of Curtis Associates, not only paints quite a different picture to the one above but also identifies a more robust underlying trend in Sydney’s residential property market above.

Date $ Value % Change Number sold % Change Clearance Rate % % Change Median Price $ % Change Number sold over $1 million % Change
4/12/10
3/12/11
123,992,800
196,892,000
+59 169
234
+38 56
53
-5 785,000
700,000
-11 37
33
-11
11/12/10
10/12/11
126,803,400
184,392,400
+45 158
254
+61 50
50
0 770,500
725,000
-6 34
46
+35
18/12/10
17/12/11
76,191,900
128,079,000
+68 121
209
+73 55
50
-9 661,500
561,500
-15 21
19
-10

Source: Australian Property Monitors

Relative to the same period last year, on the imperfect but best available data appearing in the above table:

  • far from a market that had run out of puff, the increases in turnover were statistically massive
  • the impression conveyed by sensational language such as “plunging” auction clearance rates is unjustifiable given that such a downward trend was modest; evident in only two of the three weeks and occurred in the context of such massive increases in turnover
  • whilst the uninterrupted falls in the median price over each of the last three weeks is undoubtedly consistent with a sharp increase in the number of first home buyers rushing to take advantage of the NSW State Government’s first home buyer concessions expiring on 31 December 2011, the suggestion that those buyers are supporting the market ignores the performance this month of the Sydney property market over $1 million, which on this data, rather than being “in full retreat”, gained ground relative to the same period last year. Despite a growing pre occupation with the European sovereign debt crisis since September 2011, the latter observation suggests that the market over $1 million continued to be supported by those bullish buyers described in CurtiseCall June 2010 as the ones for whom:

…”Armageddon is neither inevitable nor imminent and confidence is returning. Those in it may instead be inspired in part by the post GFC resilience of the Sydney property market and in part by a perception that as an investment destination, that market is a safe haven internationally and less risky than volatile equities markets”.

Such are the buyers whose bids pushed the desirable but dilapidated 7 Gelding Street, Dulwich Hill about $250,000 above the comparable sales evidence to $1.166 million at its 17 December 2011 auction. They are also the sort of buyers responsible for other unreported, off market purchases this month including a $2.4 million acquisition of a prime residence at Bondi Beach.

Predictions for the 2012 Sydney residential property market over $1 million

  • the European sovereign debt crisis will continue to be the most significant influence on buyer sentiment and confidence
  • interest rates will continue to fall despite increasing resistance by the four major lenders to pass on cuts in the official cash rate
  • announcements by the NSW State Government later in 2012 regarding heavy and light rail projects will influence prices of properties in close proximity to those projects
  • there will be a growing appreciation of the threat to Sydney property prices posed by coal seam gas mining
  • if the European sovereign debt crisis is not resolved (most likely in this article’s view), there will be little change from this year in buying opportunities, turnover, price levels and frequency of mortgagee sales
  • if that crisis is resolved, large numbers of finance approved but presently hesitant buyers will enter the market with there being a return to the heady days of late 2009 and 60+% auction clearance rates.

As this is the last CurtiseCall for 2011, we wish all our loyal readers a happy and safe festive season and look forward to sharing our views with you starting in February 2012.