Last weekend’s “Super Saturday” was NSW’s second biggest auction day on record with 687 auctions (452 in Sydney) and a 70% clearance rate, transacting about $300million in property - a testament that both sellers and buyers are returning to the market in a big way.
Figures compiled by the Australian Property Monitors for February and March show that four interest rate rises and three quarters of strong house price growth have barely impacted the overall auction demand.
Reserve Bank chief Glenn Stevens made an appearance on breakfast TV earlier this week, and used the opportunity to confirm the widely believed perception that interest rates will go up this year. The market anticipates a rise to a cashrate of 4.25% by June and 5.0% by December. Many experts are tipping a raise at the April RBA next Tuesday.
However, this is not a bad sign--when the RBA says there are rate increases to come, it can represent a fantastic opportunity to invest. Property prices typically don’t fall when interest rates increase: historically, interest rate hikes have coincided with surges in house prices.
Michael McPartland, managing director and head of residential real estate at Citi Private Bank, commented on the strength at the top of the market: “The wealth market is relatively insulated. Our clients look for opportunities when everyone else is circling the wagons. Buying becomes opportunistic in a downturn, particularly as people turn to hard assets such as property when other assets experience dislocation.”
Current auction activity is increasingly concentrated at the top end of the market, with the median price of property sold at auction in February at $770,000 a record high and well above the median price of $564,000 seen last February. While there has been some cooling at the bottom end of the market, the top end continues to shine, especially at auction.
RP Data predicts the most expensive Sydney homes will rise 10-15% this year, making it an attractive market for the international/expat market, even if they do not plan to settle here yet.
Australia is increasingly popular for overseas and expat investors. Expats from around the world have declared Australia the best country in the world to raise children, and the recovering professional services market is attracting returning Australian expats and foreign workers.
In addition, Australian banks such ANZ, NAB and Commonwealth have strong representation in Asia, enabling loans to be taken overseas in Australian dollars.
Australian property is perceived as a stable and safe investment for overseas buyers, particularly from mainland China. Markets in the Asia Pacific region soared in 2009, outperforming their European counterparts. We have also noticed that foreign investors with children studying in Australia are especially drawn to investment properties.
The changes to the foreign investment rules last year mean temporary residents can now buy established homes as well as new developments, and the procedure has been simplified for overseas buyers buying new homes and off the plan.
Most foreign and expatriate investors are seeking properties within a close radius to the city’s CBD, making the Lower North Shore a popular market.
In addition, a well publicised housing shortage is attracting buyers to the market right now. News Ltd is reporting that by 2029, the housing shortfall could reach 500,000 homes and apartments. The housing shortage will be most critical in NSW, which accounts for 1/3 of the nation’s population, but is only developing less than 20% of the nation’s new dwellings.
The GFC is in part to blame as property developers struggled to raise funds in 2008-2009, and continue to face strong obstacles to finance post-GFC. This has had a particular impact on high-density developments.
Australia is building fewer houses per head of population growth than at any point on record. The Housing Industry Association predicts around 152,000 dwelling commencements this year, fewer than the 190,000 needed to keep up with the rate of population growth.
Australian population has tipped 22 million and Sydney’s population has hit 4.5 million. Sydney property market’s median price is set to double in the next 10 years.
So what does this mean for you? Right now the property market is hot, especially in areas like the Lower North Shore. The resurgence in homes coming on the market we are seeing is being matched by a swell of buyers. This is the best market to sell we have seen in years, and for buyers who have been looking for months on end, there is exciting new homes hitting the market every week. Call us today if you have been considering buying or selling to learn what the new market could bring you: 02 9968 1700.
Wishing all of our clients and future clients a happy Easter holiday.
All the best,
Joshua Wygoda
Century 21 Resnekov Realty - Mosman
02 9968 1700 - 0414 666 190
