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Spring Newsletter 2015

Dear Clients and Friends,

158 Wolseley Rd pictureWelcome to Spring in Sydney where our real estate market has been booming for more than two years.  It's now time to ponder some winds of change. In this newsletter we report:
  • Key fundamentals of cheap money and underlying buyer demand will underpin ongoing but diminished growth 
  • Conditions are easing though; increasing stock means it's no longer a seller’s market
  • Market strength differing depending on location
  • Buyer numbers on properties dropping, but quality properties still achieving strong prices
  • The market for investment properties $500k - $1.3m has softened with recent APRA regulations playing their part
  • House prices $1.5m - $3m remain those most heavily impacted by stock levels
  • Top end sales continue with local and offshore buyers showing confidence in Sydney 
  • Hannah's corner - Stylists' Pillows
  • From Third Grade Colts to The Rugby World Cup


A change in the wind?

Three weeks into the Spring selling season, the Sydney market has demonstrated some signs of fatigue. This comes after a dizzying run of more than two years' strong growth during which overall Sydney median prices rose by 15.4% in FY2014, and 16.2% in FY2015. Recent weeks have seen auction clearance rates fall from levels comfortably above 80% to now sit in the low 70%s. Whilst this is still a healthy number, the trend of these clearance rates has been downwards for seven weeks, with the seasonally high level of anticipated listings still ahead of us (due mid-October).  

All year, the market has experienced a “Catch 22” scenario, where despite strong prices being achieved, stock in many segments continued to remain tight. Vendors (both upsizers and downsizers) have been reluctant to list their property for sale as they were unable to see anything suitable to buy. Owners had a fear of being caught out in a rising market, and it was much easier to remain in the confined safety of their own home. Buyers were also panicking seeing prices rise around them with little to choose from. Accordingly, there was strong competition for those properties that did reach the market.

In the past 2-3 weeks a different market dynamic has crept into play for a variety of properties, be they two bedroom apartments or four bedroom homes. Properties that would have had 4-5 legitimate buyers competing for them and would have sold within Billyard Ave pic2-3 weeks are spending longer on the market and now have fewer buyers competing for them. Buyers are feeling less pressure and compulsion to engage early to beat off the competition. Campaigns that were “definitely running all the way through to auction” are now being brought to a head early simply because demand was not materialising as expected.

Now this is not a universal scenario across all properties and quality homes, especially, are still enjoying strong campaigns and achieving very good sales outcomes. But in a market that has seen many low calibre homes sell for strong prices to desperate buyers, the difference in market dynamic is noticeable

The September school holidays will see an enforced break for many house hunters but upon everyone’s return when the volume and overall quality of properties increase we will have more sustained evidence to work off. What we can say though is we are moving towards a much more balanced environment with greater parity between buyers and sellers - no longer is it purely a sellers’ market.

 

Where to from here?  Chalk Road's view

Later in this newsletter we profile a selection of results to illustrate the strength of the market over recent six months. Balancing this historical review with a forward outlook, our key observations and predictions are these:      

  1. Bourke St pictureIf there was one word describing the current state of play it would be “inconsistency”. Stock levels in some locations are strong but for others, we continue to witness tight supply. Better quality properties which sales agents assumed would fly out the door are gaining less traction as weary buyers disengage from the process, heartened by the drop in clearance rates. Conversely some lower calibre properties are still benefitting from pent-up buyer demand; three we were tracking closely sold this week for more than 10% above reasonable expectations.
  2. The one-two bedroom apartment market has definitely come off a notch or two in recent weeks. Apartment supply is improving more than houses and prices are easing a little which is delivering better rental yields for our investor clients, especially for properties closer to coastal areas as we move into ‘summer market rental dollars’. The impact of APRA's mandate to the banking industry to raise interest rates for investor clients seems to be reducing competition in this sphere
  3. Lower North Shore sales agents are not seeing a huge increase in expected listings for mid-late Spring which may keep prices firm. However, a number of vendors in this area are starting to ask sales agents to get their property to the market on very short lead times - perhaps wanting to catch the last elements of the top of the market. We wonder whether a very late-year rush of listings might materialise as more vendors attempt to sell before 2016? 
  4. The pipeline for lower northern beaches listings is healthy and will give buyers much needed choice that has been missing for many months. Expect properties to spend more days on market along with a move toward greater 'fixed pricing' to facilitate transactions more readily. Demand in this area remains strong; expats especially are lured to the more affordable 'sophisticated coastal living' that Bondi or Bronte also delivers
  5. The top end of the market is seeing reasonable turnover and good homes are selling well. Whilst the depth of buyers per property may not be deep, the quality of those buyers is. Those who are active in the market are pretty committed to making a purchase and are willing to put out for high calibre real estate. There has been quite a bit of targeted horse trading going as skilled agents align recent vendors of high end property with a suite of ready-made options for consideration. 
  6. The broader growth of the one and two bedroom apartment market over the past 18 months has seen a number of long-held investment whole blocks of flats come to market during the year and sell for very strong prices 
  7. Downsizers are playing a significant part in the current market. Their decision to sell their homes (or not) plays a big role in the level of supply reaching the market. Those downwsizers who have sold are underpinning a strong market for apartments in the $2m - $4m range in locations such as Neutral Bay, Elizabeth Bay and Double Bay
  8. Rozelle pictureWe see the inner west as being the real engine room of the current Sydney market. It continues to provide strong appeal for younger home owners with budgets up to $1.5m who are otherwise priced out of the eastern suburbs and lower north shore. Auction clearance rates have remained above 80% for this part of Sydney in recent weeks
  9. With the AUD/USD having fallen from 0.81 at the start of the year to 0.71, the commitment from expat buyers is increasing. We are now fielding greater interest from offshore buyers readying themselves for opportunities late this calendar year and in early 2016

                                        

Selected Eastern Suburbs Activity

Within Paddington and Surry Hills there has been a shortage of two and three bedroom terraces compared to the number of buyers. Prices have remained very firm especially in the $1.7m - $2.2m region. Median house prices for the Paddington (which overwhelmingly comprises terrace houses) sat between $1.4m - $1.45m from 2010-2013. Following 9% price growth last year and a further 7.6% this year, that figure has now risen to $1.7m. Owner-occupiers seeking something in a reasonable state for immediate occupation require a minimum of $1.9m to secure a three bedder with parking - even at that price, there may be limitations to the property. 

This lack of stock has also seen interesting results for homes above $3m. Following the sale of 100 Hargrave Street, Paddo for $3.65m at auction in early August, the sales agents were able to convert the underbidder into the buyer of 96 Hargrave Street for $3.626m ten days later. The highest level of interest shown in this same house 8 Dick St picjust 3-4 months prior was in the low $3m’s. Further reinforcing the impact of low stock levels was the result of a simple, basic freestanding home at 16 Glendon Road, Double Bay which sold for $3.1m which was $600k above reserve.

The $3.5m - $7m bracket in Vaucluse, Dover Heights and Bellevue Hill endured a strong run through Winter. Buyers were active and present in good numbers resulting in competitive scenarios on many homes. Two recent off-market Bellevue Hill sales around Kambala Road/March Street provided strong results for their owners around $5.5m and $7.5m. However in the past fortnight, there has been a drop off in the number of buyers on many properties. Prices have not fallen, but there is now somewhat of an impasse, as fatigued purchasers start to sit back and observe what will happen, rather than jumping in to compete. 

One area that has risen to new levels is Randwick/Randwick North which now boasts close to 20% house price growth since last year, a figure that will be boosted with last Saturday’s auction sale of 8 Dick Street for $6.1m (pictured above). Much of the real action centres arounds the highly-regarded Dangar and Wentworth Streets with highlights being $5.15m achieved for 1 Dangar Street and the strong result of $2.9m for a semi at 43 Wentworth Street, where 8 registered bidders pushed the result more than $350k above reserve. There have also been two off-market sales of family homes in Wentworth Street which have yet to reach the public eye, one being in the low $4m’s with the other being in the mid-$3m’s.

 

Top End Apartments

The year to date has represented the strongest on record for apartments in the $6m - $15m price bracket with many deals being concluded off-market, rather than via formal public campaigns. Just this week, an apartment in the Ercole Palazetti designed “Villard” on Macleay Street sold in an off-market deal for $8m to a downsizer from the north shore. Another off-market deal in Elizabeth Bay around the $7.5m level could be just days away from completion. 

Billyard Ave pictureThere has been good depth to this segment due to the improved liquidity of the housing market. However there are a limited number of apartments within Sydney at the upper end of this price bracket - a gap exists between what clients want, and what actually exists.  Downsizers who have large family homes to sell (complete with pools, tennis courts etc), are now finding there is very little change left over from options that are substantially smaller than they would like, plus they need to incur the sizeable quarterly levies which in the case of the above-mentioned Villard apartment came to $36k per year.  In some cases, these figures can be in excess of $60 - $75k per annum.

 

Selected North Shore Activity

One of the most competitive market segments has been for 3 to 4 bedroom houses and semis from $1.8m - $2.5m. We continue to witness young families going head to head with downsizers, as both groups scramble for anything they can get their hands upon. More often than not, it is the younger families being left empty handed, due to the constraints on their upper budget limits. A direct side effect has been the increased focus on Lane Cove and Greenwich from buyers unable to get a foothold in Cammeray, Naremburn or Willoughby.

13 Echo St picIn recent months we have seen some very strong prices paid for homes with limitations that would hold them back in a softer market. 13 Echo Street, Cammeray (pictured left) left many house hunters amazed when it sold for $2.12m, whilst a terrace at 8 Lytton Street, Cammeray with no parking, very little direct internal light, located next to a large block of units sold within 4 days for $2.1m. In that case, two downsizers who had already sold and were desperate not to be caught out, took the result well above expectations with the vendors having paid just $1.45m two years ago.

There has been a real shortage of quality family homes in Mosman/Neutral Bay/Cremorne between $3m to $6m for a number of months. Homes which have made it to the market enjoyed very strong results, such is the imbalance of active buyers compared to suitable options. Last week, 138 Raglan Street, Mosman sold for $3.55m, having been purchased for $3.1m just 12 months earlier. Two sales in Noble Street, Mosman reaffirmed how eager buyers were to get their hands on properties in this well-located precinct with 21 Noble Street’s result of $4.305m 10% higher than market interest one year prior. 2 Pindari Avenue, Mosman which could only attract buyer demand around the $4.3m level and failed to sell 12 months ago, has just traded for close to $5.2m. 104 Kurraba Road, Neutral Bay (pictured below right) which struggled for traction back in 2011 around $3m just sold for approx $3.75m. All pretty heady stuff I am sure you would agree. 

104 Kurraba Rd pictureAn interesting dynamic over the past 9 months has been the continued price growth and buyer demand for homes on the northern side of Military Road. Whilst affordability has played a role in this, more families have been warming to its quieter streets, broad outlooks across Middle Harbour, and greater exposure to pure northern sunlight. A number of premium sales above $7m around Beauty Point have further legitimised this location as one for serious buyers, with Chinese/Chinese Australian buyers featuring prominently amongst the new owners.

Looking further up the line around Roseville, Lindfield and Killara, the house market up to $2.5m has been particularly strong. As one agent told us “you can sell everything with your eyes closed, so strong is the appetite from buyers”.  Over the last two quarters, Lindfield’s price growth was 23% year-on-year, with Roseville up 20%. It’s almost impossible to purchase a home in these locations for less than $2m, even on the west side of the Pacific Highway.

168 Karloo Pde pic

With the pressure so strong in the mid-$2m range, agents are getting stronger traction in the $3m to $4m segment. Whilst there are a good number of local upsizers within this group, many buyers from outside the area (especially Epping, Eastwood and the inner west) are moving in, seeking proximity to private schools.

The signs in this part of Sydney are suggesting a reasonable increase in the volume of listings, especially as we get into late October/early November. In an area where many of the owners of larger homes can spend two years getting their head around putting the long-held family home on the market, this is significant. 


Palm Beach/Whale Beach/Clareville

Contrary to the growth experienced across many other parts of Sydney, this pocket of Sydney has remained relatively flat throughout 2015. There has been the odd substantially priced ‘trophy transaction’ this year, and turnover for homes below $1.75m has been reasonable. However for homes priced between $2.5m - $5m, this area continues to be one where a great disparity exists between vendors’ expectations and where the market actually sits. The volume of new, appealing stock that has made it to market has been limited. Many offerings have been recycled from earlier campaigns or have been on the market for quite some time. Some of these examples below help paint the picture.

325 Whale Beach Rd pic19 Thyra Road, Palm Beach - we inspected this property late last year for a client when the owners had expectations above $3.5m. It sold 200+ days later for $2.9m.

12 Cabarita Road, Avalon - this north-east facing deep waterfront home was purchased for $4.6m in 2007. After being on the market on and off since late 2012, it sold in June for $3.5m

24 Delecta Ave, Clareville - sold in April for $3.9m for the same price it was purchased 5 years earlier, having spent 18 months on the market

325 Whale Beach Road, Palm Beach - (pictured above) sold in March for $4.6m after starting with expectations around $5.5m 5 months earlier.

Hopetoun Ave

40 Evans St,     Bronte

5 bed, 3 bath, 2 car
801 sqm
Sold 5 Sep ~$8.45m
 
An über smart addition to an attractive period facade.This west-to-rear facing home was located in one of Bronte's best streets. Every element of the property from the architecture, interiors, lighting & the garden were done by a "name" supplier. Sold prior to Auction.
7 Hill St pic

22 Barton Ave, Haberfield

3 bed, 2 bath, 1 car
700 sqm
Sold Aug 31 $2.505m 

A single level Federation home, in "original" condition and layout. Located on the southern side of one of the better streets in Haberfield, close to the park and Light Rail stop. Three registered bidders, sold at auction 10% above the agents' expectations.
Gipps St pic

18/18 Macleay St, Potts Point

5 bed, 4 bath, 4 car
350 sqm
Sold 11 Sep $8m 

A whole floor apartment with views to The Heads in the heart of Macleay St village. The apartment had several terraces, separate formal and casual living & dining rooms and its own foyer straight off the lift.    
wood st pic

1 Dangar St, Randwick North

4 bed, 4 bath, 2 tandem car
835 sqm
Sold 8 Aug $5.15m

A discreet single level, east facing Federation home on a double block.  250 groups through the inspections but only 2 registered bidders on the day. The property sold just over reserve to a doctor who wanted to be close to the hospital.
 
John st pic

34 Arnold St, Killara 

4 bed, 4.5 bath, 3 car
1,738sqm
Sold 2 July $5.28m 
 
The shingle clad front of this home belied the very slick new renovation at the rear. It had everything: tennis court, pool, wine fridge cellar, media room, Listed in October last year, the vendor originally wanted >$6m, it finally sold using a different Agency.
32 Refinery st pic

1/28 Murray St, Bronte

1 bed, 1 bath, 1 car
67 sqm internal
Sold 9 Sep $915k

Whilst this was a 1 bedroom, ground floor apartment facing into the hill on the northern side of noisy Murray St, the 120sqm of outdoor courtyard on title made the apartment unique.
 
8/60 darling pt rd pic

16 Glendon Rd, Double Bay

3 bed, 2 bath, 2 car
353 sqm 
Sold 8 Sep $3.1m

A small, SW facing, single level cottage ripe for renovation backing onto the large open stormwater drain running through Double Bay. A strong result given the vendor rejected a $2.4m pre-auction bid and the reserve was $2.5m.
Frenchs rd pic

393 Mowbray Rd, Chatswood

4 bed, 2 bath, 3 car
898sqm
Sold 15 Aug $2.325m 

On a battleaxe block on the border of Lane Cove.  The 22 registered bidders didn't mind that it was on such a busy road or that there was an 8 storey apartment building overlooking it at the rear. Sold for $725k over the reserve of $1.6m.
 
68 palmgrove pic

1/62 Osborne Rd, Manly

3 bed, 1.5 bath
83sqm
Sold 1 Sep $1.2m

This ground floor apartment near the Harbour in southern Manly opened directly onto the common garden of the block of four apartments. Two of the bedrooms were small at <8.5 sqm.   
 
17 Morella Rd pic
 

You wouldn't ask your dentist for open heart surgery...

Earlier this year working on a North Shore brief, we noted a sales agent sitting alongside a family as they prepared to bid for a house at auction. The connection between the parties was that once this family had purchased a property, this sales agent would then be selling their current house. Now as any Buyers' Agent would know, representing a client at auction can often be the culmination of many months' work. This final act itself is something that involves a large degree of preparation, not the least of which is devising a pre-determined bidding limit which is adhered to.

The elements that go into determining this figure include (but are not limited to):

  • an intimate knowledge of the property
  • a strong understanding of the property’s fair market value
  • knowledge of that property’s past sales history
  • insight into how the current sales campaign has been tracking
  • an analysis of the likely level of competition for that property, not to mention some specific knowledge of who those competitors actually are
  • a clearly defined approach to the mode of communication we have with the client for whom we are bidding, whilst the auction is in process

As background to this scenario, the house in question had been on the market for quite some time just a few months previously with a different agent, it failed to sell and failed to attract interest above $3.5m. 

So when bidding from just the three registered bidders climbed from $3.3m to $3.55m and then stalled after the lowest party was knocked out, it was clear to most that the end of proceedings was nigh. One of the two remaining parties cobbled together what was most likely their final push - a small bid of $5,000, then $1,500 and then after much reluctance $1,000 more to get their nose back in front. It was quite apparent which of the two parties was feeling the pain and the pressure.

So imagine the surprise to all those gathered (including a number of seasoned auction watchers!) when the 'bidding sales agent' mentioned earlier, apparently with his client’s best interests at heart, thought it both prudent and necessary to launch a decisive knockout blow with a $230k increment. Chalk Road nearly fell out of the tree we were perched in. Needless to say, there was no response from the other party and the property was duly knocked down to this sales agent and the family he was representing.

About 5 minutes after proceedings, we noticed some animated discussions amongst the bidding sales agent and the family which continued for quite some time. Now we acknowledge we were not privy to every element of their strategy, nor their post auction discussions, but not in a thousand auctions could we imagine finding ourselves or our clients in that same position.

Please call us if you need help finding a suitable property, if you have found one and just need some help negotiating the purchase, or if you just want some trustworthy advice in navigating the Sydney real estate scene.  

 

We are word of mouth

Chalk Road is renowned 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.
 

Hannah's Corner - Stylists' pillows

Perhaps I'm a bit out of it but truly, how many pillows can you stack on a bed? I nearly lost count, but in the above picture there are ten.  Every time I inspect a home and see the stylists piling the pillows on the beds I have two thoughts: how long would it take to get into bed each night? Which reminds me of the prim Charlotte, from Sex & The City, and her husband Trey, taking their nine pillows off in such an orderly manner.
For the record, Catherine Martin, had six on her bed (pictured below) when listing the incredibly decorated "Iona" in Darlinghurst - or perhaps that's just what they left behind when she and Baz moved to NYC!Catherine Martin's bedroom
Don't start me on people who karate chop pillows... perhaps that's in the next issue...
 
 

Up the Students

September will be a proud month for the Chalk Road sponsored Sydney Uni with six players representing the Wallabies at The Rugby World Cup. Unbeknown to many, Bernard Foley, Nick Phipps and Will Skelton actually started their careers in the lower ranks of the Club, working their way through Second and Third grade Colts teams, well before assuming higher honours.

Just last month, Uni won all three Colts Grand Finals in the NSWRU competition against their old foes Randwick. Amazingly, 2015 marked the 15th consecutive year all three Uni Colts teams made their respective Grand Finals. Illustrating the real pathway Uni looks to provide for its aspirational players, many of this Colts squad are amongst 22 Uni players forming the Sydney Stars team which compete in the Buildcorp National Rugby Championship, a real stepping stone to Super 15 Rugby.

To top things off, a further squad of 31 players from both the Colts and Grade ranks are soon to set off on a 2 week ‘high performance’ tour of the USA, where they will play 3 games against Arizona State, University of Southern California and UCLA. It's a very different environment these days to the one enjoyed by a certain Chalk Road staff member who fumbled the ball around in the lower grades at Uni many years ago!
Syd Uni Pic


Find Out More About Us

Contact us or go to our website to read more about our services and what Chalk Road can do to help you find your ideal home or investment property.
We have an archive of our past newsletters which you are welcome to read.  If you would like to read them click here.
Best wishes,
Edward and Hannah Flitcroft
www.chalkroad.com.au
+61 414 569 604


 
The information contained in this newsletter should not be construed as investment advice. All parties are encouraged to seek independent guidance from their accountant or financial advisor.
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