Winter Newsletter 2014
Dear Clients and Friends,
Mid-July marks the quietest period of the Winter selling season so we can now expect activity to ramp up as we head into Spring. With strong clearance rates over the past month, the intriguing question is what might we see as the quality and quantity of property begins to improve?
So let's get into it; in this edition we cover:
- The Chalk Road view
- Key Spring indicators
- Top 20 Sales of the financial year
- The real star of the Sydney market
- The things a Buyers' Agent will do…..
- We grill a leading auctioneer
- Chalk Road to take on a Sydney Uni Rugby intern
- What would you pay for this house?
Please call us if you need help finding a suitable property, if you have found one and need some help negotiating the purchase, or if you just want some trustworthy advice in navigating the Sydney real estate scene.
Edward and Hannah Flitcroft
+61 414 569 604
Sydney snapshot - facts & figures
- RP Data indicates Sydney dwelling values are up 23.1% since the start of the current growth cycle in June 2012
- This same measure indicates 5.5% price growth in the first half of 2014
- Weekend auction clearance rates have sat between 72% and 75% in recent weeks which is healthy for this time of year
- Average time on market for properties in June 2014 was 31 days compared to 45 days this time last year
- Vendor discounting on asking price is 5.3%, which remains consistent with the same period last year
- Sydney gross rental yields for houses are at 3.8% with units at 4.6%
The Chalk Road view
As our regular readers would know, it has been longer than usual since our previous newsletter. In that time we have been extremely busy with a varied array of new client briefs that have come our way. Rather than this being some self-absorbed focus on ourselves, it is more a reflection of the significant level of activity within the Sydney market.
This time last year, the market sailed straight through the usually quiet winter months. As we moved deeper into 2013 then 2014, we witnessed record clearance rates in excess of 80%. There were regular sales well above reserve prices and numerous suburbs were able to boast annual median price growth of 15-20%. As far as some commentators were concerned, the claim could be made - “Sydney is in BOOM time”. Everyone from columnists in respected newspapers, trusted TV newsreaders and those spruiking off-the-plan apartments was sprouting this message. Sydney’s favourite dinner party topic had resumed its rightful place at the top of the list.
Concurrent with such commentary was the cautionary suggestion from the bears that people were fuelling a catastrophic property bubble. There was also a degree of media discussion about the perceived role of non-residents influencing these prices - especially Chinese buyers. Yet for every claim that sales were being made to 'foreign' buyers without the necessary FIRB clearance, there were just as many doubting whether they needed it in the first place, claiming these buyers were actually 2nd and 3rd generation Australians.
All of which brings us to today where a slowdown in the market has morphed into another popular headline, “Sydney’s great property boom has ended”. In the past 6 weeks, much of the Sydney real estate market paused to take a breath. This is not unusual at this time of year, though some people are wondering whether the market is now out of breath. Is this the case or should we expect a resumption of the hectic pace from earlier this year once Spring arrives?
As we continually point out, there are too many sub-markets in play to apply a single description for what is really going on across the entire market. Differing suburbs, price brackets and property types (houses v apartments...........those bought by owner-occupiers vs those bought by investors) all have their own unique supply and demand dynamics. That is why every client’s brief demands its own intense scrutiny before determining where to buy and when. However as we prepare for Spring, there are some key observations worth factoring in.
Be it houses or apartments, there are many buyers ready and willing to act in the sub-$1.5m market, especially with conditions being conducive for those looking for alternatives to cash or equities. This should continue to drive this lower segment forward for the time being. The performance of family homes in the $2.0m - $4.0m bracket will be impacted by how much extra stock becomes available; there is a real shortage. Buyers looking to 'step up' into this bracket are exercising real caution before they commit; and in many cases are opting to sit out until better options arise. At the upper end of the market, the Eastern side of the bridge is in a healthier state than the North. The turnover is healthier in the east, but across the board, the prices being paid sit at fair but not earth-shattering levels.
Key Spring indicators
- With interest rates expected by most to remain unchanged (and low) for the next 9-12 months, the RBA has been making cautionary noises to investors
- The strong price growth of the past 4 quarters has plateaued...…though it is not retreating
- Buyers were more aggressive and positive prior to April but became cagey and cautious as Winter closed in
- Apartments and houses sub-$1.5m remain the star performers
- Stock levels across the board (especially houses) are down which is underpinning price levels
- Quality homes have been achieving strong outcomes; but buyers have been bypassing those with limitations hoping Spring will bring greater choice and quality
- Sales agents have long lists of potential vendors unwilling to sell, as these vendors see few viable options they could buy and move into
- Potential stock levels for Spring are mixed. Better performing agents have solid numbers in place for their first scheduled auctions in mid-August whereas other agents have few or none at this stage
- Vendor price expectations that got carried away with the ‘boom' headlines are now coming back into check
- Rental yields for inner ring suburbs dropped in recent weeks which is limiting investor interest
Top 20 Sales - 12 months to June 30
The real star of the Sydney market
Sydney being the glamour of a city she is, much of the focus tends to be on high-end prestige house sales. To that end, this segment has some improved runs on the board over the past two years. Back in FY 11/12, the $15m purchase of a waterfront home in Bayview Hill Road, Rose Bay saw it sit 5th in the list of top 20 sales. As noted from the past year’s top 20 sales published above, that figure would have only placed it 10th in this year’s list.
However, the real story of the Eastern Suburbs over the past 12 months has been the continued and substantial growth in apartment prices, especially two bedders, which comprise a large proportion of this segment. From Maroubra to Surry Hills to Rose Bay, buyers have been clambering over each other to get a foothold in the market.
In the past fortnight an 84sqm Art Deco two bedder without parking at 8/97 O’Sullivan Road, Bellevue Hill sold for $867k. With only minimal enhancements, this represented a $200k increase on the vendor’s purchase price just 2.5 years earlier. An even more impressive result came from a simple 70sqm two bedder with parking in Dutruc St, Randwick. The owners having paid $540k for the property in March last year, spent no more than $15k on a repaint and new kitchen cupboard doors, before selling it one month ago for $670k. Allowing for stamp duty and the renovation costs, this represented a 17% return in fifteen months. Similar tales abound closer to the CBD, with Surry Hills having passed its mantle to neighbouring Redfern as one of the ‘hottest’ addresses in town. However with median price growth of 14% in 2013 and 17% so far this year, it indicates the secret is out.
For much of the first half of the year, we were very comfortable in encouraging many clients to remain patient and not get spooked by the bullish prices being paid by others. This was especially the case in popular coastal locations such as Bondi, Bronte and Clovelly. We were witnessing 2 bedders with no parking selling for well in excess of $900k at rates close to $12,000 per sqm. One such property at 11/45 Francis Street, Bondi (pictured right) which sold for $915k had its second bedroom measure no more than 7.5sqm. That said, the new owner landed themselves a very cool pad!
Whilst the volume of suitable stock has remained low in this part of Sydney, we have progressively picked off appropriate (and good quality) properties as they have come to hand, but only at prices we felt reflected fair value or which enabled investors to achieve their targeted rental yields.
The things a Buyers' Agent will do…
Earlier this week we received a call from someone "wanting to know more about these Buyers' Agents I keep hearing about”. The only task she really knew we undertook was to access properties not already on the market. So we thought we’d run through some of the added elements that make the job of a Buyers’ Agent so varied and enjoyable.
- Climbing the Harbour Bridge in a torrential downpour to determine if the sight lines of a Darling Island apartment would be impacted by the still-to-be-built Barangaroo development
- Catching ferries or hiring small runabouts to pockets of Sydney Harbour to evaluate waterfront properties from aspects that can’t be viewed from land
- Perching in trees overlooking a neighbouring backyard to record noise levels of three barking dobermans. The purpose being to provide a client with compelling evidence as why they should NOT buy a specific property they had in mind, site unseen
- Arranging a local vet to provide ‘expert’ evidence to a Body Corporate meeting as to the noise level of bark made by a client’s dog and its breed in general. The purpose being to secure approval for that dog to live within said client’s apartment block..........(approval granted!)
- Rushing to a local rugby ground, waiting on the sidelines of a third grade rugby fixture for 23 minutes, and at half time, securing the signature of the loose head prop on the front page of a contract of sale. Armed with this paperwork, then heading to a sales agent's office 43kms away, in order to effect exchange on a $1.2m semi bought later that afternoon.
- Taking leaf samples off a batch of trees that had the potential to block some views and then arranging for a qualified arborist to determine how much higher that strand of species could be expected to grow in its lifetime
- Commissioning a leading firm of Sydney architects at 4pm on a Friday then working with them well past midnight to formulate concept plans and associated build costs for a property being auctioned at 9.30am the following morning
- Pouring through archival records in The Mitchell Library to uncover the significant history behind a beautiful heritage property which confirmed to a client, “this is definitely the property for us”
- Waking up well before dawn on multiple mornings in cold, wet July, to sit outside an inner city apartment block in order to monitor noise levels made by delivery trucks to an adjacent local bakery
- Allowing oneself a five minute lunch break for a sandwich on idyllic beaches in Jervis Bay/escarpments in the Hunter Valley/bushland settings in Kangaroo Valley between viewing potential homes for clients
And there is no extra charge - it's all part of the service!
We grill a leading auctioneer
Clients regularly seek our advice as to who the best sales agent would be to sell their house. A factor we place enormous importance on (but often overlooked by many), is which auctioneer that sales agent uses. A good auctioneer plays a critical role in the final price obtained for a property... let alone whether that property sells at all.
One of the best in the business is Damien Cooley from Cooley Auctions
. It is not only his skill set and talent that made us want to catch up with him, it is more that his company conducted close to 5,500 auctions in the last financial year. With such enormous exposure to the coalface nearly every day and night of the week, we felt his views were worth uncovering.
5,500 auctions is a huge number, so what is your market share across Sydney?
"Eastern Suburbs > 41%
Lower North Shore 9%
Inner West 14%
Upper North Shore 9%
How have you viewed the market so far this year?
"There is no doubt in Q1 & Q2 it has been extremely strong. We saw the auction clearance rate rise to in excess of 80% for many months. In June our own Cooley Index showed a monthly clearance rate of 74%. Even though the clearance has dropped slightly, the market remains very buoyant. Remember, in a “normal” market we would expect to see a clearance rate of approximately 50% – 60%.
The Cooley Index in June showed that we averaged 4.7 bidders registering at our auctions and an average of 15 bids per auction. The more interesting figure is that an incredible 72% of properties that sold at auction, sold at or above their reserve price."
Do you notice any difference between the 'typical' North Shore Vs Eastern Suburbs buyer?
"Every buyer is different, but the north shore buyer tends to be more conservative and measured in their approach to bidding and buying. In the east, buyers tend to adopt somewhat of a 'younger' mentality. There seems to be more willingness to take risks. We probably have more registered bidders for properties in the east and my gut feel is a higher proportion of properties in the east sell above reserve than the north."
Is it simply a case of "deepest pockets win" at auction?
"Ultimately the buyer with the biggest budget should purchase the property. However with the right bidding strategy in place these buyers can be out performed. There is no doubt that an experienced bidder/buyers agent representing your interest at an auction is of great value."
You often read stories about “the last minute” bidder. Are these stories fact, or just a great urban myth?
"Whilst it is not a regular occurrence, it certainly does happen especially in a stronger market such as we have now. I recently sold a terrace in Paddington for $1.3m and the buyer had only inspected the property 5 minutes before the auction commenced. The buyer feedback pre-auction had been circa $1.2m – $1.25m. so it is clear that this buyer saw value despite the limited research conducted specific to this property, but he clearly had knowledge of the Paddington market. It was worth noting the property was bought as an investment."
One segment of the market we feel has been very strong is that for 1-2 bed apartment in the east. What is your experience?
"Spot on - a good example of the strength in this investment/entry level market is a property that I sold at auction on Thursday 17th July. A one bedder at 29b/3 Darling Point Rd, which had a reserve set at $630k. 6 bidders registered. The bidding started at $580k and quickly progressed with 17 bids and sold for $720k. There was a good mix of owner occupiers, investors and one downsizer, who was the eventual buyer."
Many agents are commenting that stock is tight. Is this backed up through your own forward bookings and how do you see the next six months play out?
"I don’t think stock is as tight as made out, but perhaps the quality is. We already have some good quality houses that are booked in to be auctioned by end of August. Within the next month, buyers should start having some good choice. The big rush of property will come through after the October long weekend and buyers will have their greatest volume of choice at that time.
I don't think we will be seeing those same 80% clearance rates we enjoyed earlier in the year. By the time the bulk of the new stock reaches the market, I think it is possible that clearance rates will settle in the high-60% range."
So when do you think is the best time to buy?
"It might be better in Spring as an investor, but to my way of thinking a family home is best bought whenever it comes on the market!"
Recent sales of note:
17 Lawson St, Paddington
$1.662m on 14 June
121 sqm land
4 bed, 2 bath, 0 car,
Quite basic. Unrenovated internally, however did possess a north-facing deck off its rear dining area. Property had spent 88 days on the market.
29 Girilang Ave, Vaucluse
$4.150m on 11 June
5 bed, 3 bath, 4 car
Family home with ocean views to the east. Sold prior to auction with expectations of above $4 million. Owners paid $3.775m in Feb 2010.
62 Mooramie Ave, Kensington
$2.45m on 12 April
4 bed, 3 bath, 1 car
Renovated Californian Bungalow which passed in for $2.43m before selling later that day. Previous owners paid $1.9m in 2010 before undertaking some renovations.
68 Alfred St, Annandale
$1.195m on 31 May
3 bed, 3 bath, 1 car
Tri level home sold at auction with 4 registered bidders and expectations over $1.1m and a reserve of $1.13m.
3/32 Bonner Ave, Manly
$1.160m on 14 June
174 sqm internally
2 bed, 2 bath, 1 car
Large North East facing courtyard apartment close to Queenscliff beach but with no views. Expectations were $950k. It sold at auction with there being strong competition from 7 registered bidders.
58 Bancroft Ave, Roseville
$3.36m on 15 June
5 bed, 3 bath, 2 car,
1960's north facing home in a well regarded street that had received a significant internal makeover. Sold at auction with 4 registered bidders.
64 Cascade St, Paddington
$2.1m on 8 July
145 sqm land
4 bed, 3 bath, 1 car
Striking sun-filled middle level to the home, however two of the four bedrooms were very small. Failed to sell at auction in March. Owners originally paid $2.2m in 2010.
71 Bay St, Double Bay
$7.2m on 25 June
5 bed, 5 bath, 2 car
Amongst the top 4 auction results in the east this year. The auction attracted 5 registered bidders and the home was called on the market at $6.67m.
1/1 Adelaide St, Surry Hills
$1.090m on 5 July
112 sqm Internally
2 bed, 2 bath, 1 car
Had been stylishly renovated with large a North facing balcony off living space. Sold 2 weeks prior to auction, with an estimated rental yield of 4.8%
7 Hill St, Queenscliff
$2.450m on 19 July
4 bed, 3 bath, 1 car
An exceptional result selling within 10 days for $535,000 more than the owners paid in 2010. Last minute negotiations saw the agent extract an extra $25k from two competing buyers.
37 Lang St, Mosman
$1.525m on 05 July
3 bed, 1 bath, 1car
Unrenovated semi on large level block, with the bathroom and kitchen stripped bare so not immediately liveable. There were 21 registered bidders at the auction, with 9 different parties actually placing a bid.
46 Mary St, Hunters Hill
$3.28m on 21 June
6 bed, 4 bath, 2 car,
Transformed sandstone colonial residence on large level block with expectations above $3m. Sold at auction with 10 registered bidders with 5 putting up their hand on the day.
8/60 Darling Point Rd, Darling Point
$1.928m on 7 April
130 sqm internally
3 bed, 2 bath, 2 car
Unrenovated apartment with good Westerly views of the CBD. Sold at auction with 3 registered bidders in line with expectations.
35 Fitzwilliam Rd, Vaucluse
$8.3m on 21 March
5 bed, 6 bath, 8 car
Beautifully crafted executive residence from architect Stephen Gergely with dual street access. Walking distance to Parsley Bay.
68 Palmgrove Rd, Avalon
$1.335m on 8 June
4 bed, 3 bath, 2 car
Originally listed for auction in April the home was passed-in, then re-advertised for sale by private treaty. The owners paid $1.245m in Feb 2010.
23 Spofforth St, Mosman
$3.075m on 10 March
5 bed, 3 bath, 2 car, 1 pool
A recently renovated, east-to-rear family home in a busy location. Expectations were around $2.7m with 2 strong parties submitting offers, one from the Eastern suburbs and one from Monaco.
4/195a Stanmore Rd, Stanmore
$714 on 19 July
80 sqm internally
2 bed, 1 bath
In a strong outcome, this apartment sold for $75k above reserve last Saturday with 13 registered bidders of every profile; investors, downsizers, first home owners.
21 Dock Rd, Birchgrove
$2.735m on 27 June
3 bed, 3 bath, 2 car
Had been stylishly renovated with a large north facing balcony off the living space. Sold 2 weeks prior to auction, with an estimated rental yield of 4.8%.
Chalk Road to take a Uni Rugby intern
Later this week 700 supporters of SUFC will cram into the Ballroom at The Westin Hotel to wish the club and its players good luck in their upcoming final series. At the lunch, Federal Treasurer and former Uni player The Hon. Joe Hockey MP will make a highly relevant keynote address about the broader values of sport in generating leaders of the future. This alignment is something Chalk Road plans to capitalise upon.
Knowing the calibre of individual Uni attracts, we are very excited to be putting a framework in place for a Uni player to join our business over the coming months. We will be working closely with SUFC management and its Executive Committee to identify a suitable candidate with a genuine interest in the property sector and a desire to develop their commercial skills. That individual will then form part of the Chalk Road team as an intern, helping them learn more about the Sydney real estate sector and the specific role Buyers' Agents play in today’s market. We are incredibly excited about this initiative as it further builds our connection with Australia’s oldest rugby club.
This Saturday up to 8 players from Sydney Uni take their place in the NSW Waratahs team trying to secure a place in the Super 15 Final. Nick Phipps, Bernard Foley, Paddy Ryan, Will Skelton, Jeremy Tilse, Tolu Latu, Pat McCutcheon and Peter Betham have all worked their way through either the colts or grade ranks at the club before their higher honors. The presence of so many players in the Waratahs alone bears testament to the standards of excellence the club strives for. In fact up to 23 Uni club members were involved across the five Australian Super Rugby teams this year.
In their absence, their other colleagues at Uni are of the cusp of a remarkable achievement as they strive for their 11th consecutive Club Championship in the Sydney Premiership. This has always been the primary goal for the club across all their grades. It has seen numerous players stepping up 2 and sometimes 3 grades higher than they played last season, whilst as many as 14 Colts players (U20’s) have been required to fill the gaps in the senior grades as required throughout the year. We congratulate everyone involved and look forward to following their progress during the Finals over the next three weeks.
We are word of mouth
Chalk Road is reknowned for its discretion and relies on word of mouth for much of its business. Please forward this newsletter onto any friends, family or colleagues whom you think may be interested in Chalk Road's services.
What would you pay for this house?
As the agent said it was "an unspoiled example of the organic signature-style of the legendary Sydney School of Architecture". Custom built in 1963, this was the first time it had been offered in 53 years...
At the rear it was 3 stories high and had three bedrooms, plus a 3 bedroom self-contained apartment on the bottom floor. It even had a private level 30m wide garden...
What if it had this view?
Ah, that'd be relaxing. Isn't that Bondi?
What if it was here?
or more specifically, here...
This house was sold for $15 million in October last year and as a result is featured in the table of top 20 sales listed above. It was bought by a local who plans to rebuild a new home on a similar footprint.
So next time you are doing the Bondi-to-Bronte walk, take a look up and see what's happening to the 696 sqm site.
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