Copy
Some users of smartphones, especially Blackberry, may need to view this in a web browser.
.
Chalk Road logo
Summer Newsletter
Pic: 86 Holdsworth St, Woollahra
This is best viewed in your web browser, click here.

Dear Clients and Friends, 

As an interesting year in Sydney real estate draws to a close we wanted to share some of our observations and market insights. Despite the final weekend's auctions only experiencing a 50% clearance rate, many houses are still being bought and sold behind the scenes in the last few days of the year. 

We hope you find this newsletter informative and please feel free to forward it to any friends or colleagues. If you wish to discuss anything in relation to the local property market we will be in Sydney over the New Year. 

Edward and Hannah Flitcroft
www.chalkroad.com.au


Buyer's Market?  Perhaps for some, but not all.

Many commentators described 2011 as a “Buyer’s Market”. We believe this is too simplistic a term to be used, especially when it comes with an implication that conditions are naturally conducive for buyers to purchase. It takes a more intricate review of the market and a deeper level of analysis to determine which property to buy, when, and at what price. 

RP Data-Rismark figures released in late November indicate capital values of Sydney houses fell -2.2% in the twelve months to September ’11 with apartments increasing by 1%. Interestingly, Sydney outperformed all other capital city markets in that period. Delving more deeply into this data, the overall decline in house values has been skewed by the poor performance of those suburbs with higher priced real estate. The graph below illustrates the most expensive 20% of Sydney’s suburbs endured a 3.2% decline, whilst 80% of Sydney’s homes actually generated capital gains of 1%. As leading financial economist Christopher Joye trumpeted, “It is an affluent housing correction”.

Chart of Cheap, mid-priced & expensive suburb prices

Since September, activity has remained soft across Sydney with there being no discernible boost from the Spring selling season. Auction clearance rates have hovered in the low-mid 50% range since Winter. That said, we are still witnessing good numbers of prospective buyers ‘passively’ participating in the market - be it through continued property inspections or their presence at auctions. Whilst they may not have bought yet, some of the market inertia can be put down to vendors not engaging purchasers at the price levels put to them. Meanwhile, other discerning buyers are deliberately waiting on the sidelines for better quality stock to appear; a luxury they can afford whilst the depth of buyers per property remains low and price growth is neglible. 

We expect stock quality to improve in the first half 2012 as potential vendors shake the expectation that their property should be worth more than three years ago. A number of sales agents have indicated prospective clients who had held off from listing are now engaging those agents with an eye towards selling in early 2012. These vendors appear not to be ‘forced’ sellers either; their motivations vary from wanting to use the softer conditions to upgrade, or they simply need to purchase a home, having held off long enough from doing so.  

Sydney real estate is full of multiple sub-markets where adjoining suburbs can have wildly contrasting stories to tell, as can homes in differing price bands within those suburbs. The conditions we have been left with at the end of 2011 play an important role in shaping the way the 2012 market commences. 


Review of 2011

2011 delivered a challenging environment for vendors. The year started with a large array of unsold stock from Q3 and Q4 2010, much of which remained on offer well into Autumn. This presence of ‘tired stock’ continued throughout the year providing buyers with an increasing array of homes to choose from, whilst dampening the performance of new stock coming on to the market.  

However, the most influential element impacting buyer activity was the decreasing level of consumer confidence; this vital ingredient has been in short supply all year. Against a background of endless negative dialogue re the two speed economy, the carbon tax, European credit issues, and questions over the prospects for the Chinese economy, caution prevailed in the minds of many prospective purchasers. Let’s take a closer look at what has been occurring with some of the sub-groups in Sydney. 

Upper End - Top End 

Pic: 3 Cranbrook Rd, Bellevue HillThis was the segment most affected over the past twelve months where reductions in asking prices of  20% - 25% on some homes have occurred. Many luxury home and apartment owners found it difficult to find buyers despite these significant price drops.  A good quality property we have been tracking in Vaucluse hit the market quietly in 2010 with expectations of $9.5m, however the vendor is now seeking a buyer around the $6.5m mark. A nearby property at 51 Wentworth Road, purchased for $7.8m in 2008 was placed back on offer in late 2010, eventually selling one year later for $5.8m. Another property in Wunulla Road, Point Piper sold mid-year for $9.7m, having initially hit the market in September 2010 with expectations of $14m.

Contrasting these results, some recent sales have demonstrated some positivity at the top end of the market. These have included the sale of a Hopetoun Avenue, Mosman waterfront to a consolidating neighbour for $18.5m, a beachfront home in Dumaresq Road, Rose Bay for $12.5m (est) and the purchase of two Bellevue Hill homes at 116a Victoria Road, and 3 Cranbrook Road (pictured) in the $12m - $13m range. However, it should be noted that most of these properties took longer than expected to find a buyer, and competition for each was limited. 

Palm Beach and Whale Beach

Conditions have remained tough for vendors who chanced their hand in Palm Beach and Whale Beach. In early December more than 30 properties were available with asking prices of $4.5m or more. The tightening of bonus payments flowing to those working in financial markets, along with the high AUD limiting the volume of ex-patriate buyers have both contributed to this lack of demand. It is not unreasonable to expect this market to remain soft for the forseeable future given the broader economic climate. If you have always wanted a house in this part of Sydney, the coming year might be a good time to consider it.

Middle Market

Irrespective of the geographical location, there has been a noticeable weakness in this segment of the Sydney market (properties ranging from $2.5m - $5m). Going back to the first quarter of 2010 when there was a small rally, good quality homes in this price category were attracting competition from 3 - 4 interested parties. Currently, there tends to be only one, or at most two people competing for most homes in this price bracket and the situation has got worse for vendors as the year progressed, especially in Vaucluse

We witnessed a number of good houses selling for losses on their purchase prices from a few years ago. 
pic: 6 Milton Ave, Mosman
 
These included 6 Milton Ave, Mosman ($3.2m in ‘07 to $2.8m in ’11, see picture at left) and 37 Balfour Road, Bellevue Hill ($3.2m in ’06 to $3.0m in ’11). Another house at 28 Suttie Road, Double Bay which had been for sale at $4.3m in 2008, then $3.8m in 2010 eventually sold in August this year for $3.05m. Whilst current conditions are proving difficult for vendors, they have given many buyers looking in this category an opportunity to purchase houses previously well out of their reach.  

A suburb that tends to hold up in downturns of this nature is Paddington; the level of equity in many homes tends to be higher than in some of the suburbs outlined above. Paddington buyers are known to give strong consideration to multiple homes simultaneously, and it is often the by-product of missing out on one home that leads to direct action on another. However, this dynamic is missing altogether above the $2.5m level.  Last year there were 13 Paddington sales in excess of $3m; this year there has been five, only two of which have occurred in the last six months. Since October, we have been presented with an increasing number of off-market opportunities for our clients. Our observation is that buyer demand remains low for this price bracket. However, this is also giving us the opportunity to negotiate hard when a property meeting a client's needs does appear.

pic: 48 Streatfield Rd, Bellevue Hill

Not all houses in this price bracket are enduring such pain.  Two recent auctions demonstrate there is still buyer confidence for the right property. 12 St Elmo Street, Mosman was a large, traditional Clifton Gardens residence on 900sqm, complete with a swimming pool and harbour views. Three bidders competed strongly for the property, with an eventual result just under $3.9m - above the agent's expectations of $3.7m. And across the bridge, a 5 bedroom house at 48 Streatfield Road, Bellevue Hill (pictured) with a pool and great CBD views achieved $4.4m ($350k above expectations) after two parties engaged in a bidding duel at the auction. 

Entry Level to Mid Market 

Many first home owners found the market for homes above $800k reasonably resilient, especially for better quality properties. However, as you get up to the $1.5m - $1.7m level, conditions eased off, enabling some buyers to purchase a ‘renovated’ product for what would have been the 'unrenovated' price three years ago.  It remains a very competive sector overall and the recent easing of interest rates, with the prospect of more to come is likely to add further impetus.  

pic: 15 Carrington St, Summer HillIn 2010, popular Inner West suburbs such as Marrickville, Summer Hill, Petersham, Leichhardt and Annandale experienced strong growth rates between +13% to +20%. These locations benefitted from an influx of families priced out of the eastern suburbs and lower north shore. Fortunately for buyers (especially those considering Annandale and Marrickville) the levels of growth subsided enough this year to ensure they remained affordable. Summer Hill however continued its strong growth with a further 9% added to last year’s tally of 13%. With only 40-50 homes on average sold in this suburb each year, we continued to notice very strong competition anytime a quality home did appear. 

Other popular options for young families were the semis of Cammeray and Naremburn and larger freestanding homes in nearby Willoughy and Artarmon. Willoughby has been one of the better performers over the past year, with competition strong on many homes right up to the last weeks of December. Last week a 3 bedroom home in Laurel Street, Willoughby sold after just one day on the market. The intention was to “test the market” prior to Christmas, with a formal campaign commencing in late January. However, with the owners finding a buyer willing to pay $50k above their ideal price, they sold immediately.

Semis in Bondi, North Bondi, Randwick and Coogee continued to bring strong prices but on balance were deemed expensive by many owner-occupiers. Their size and internal condition did not compare well with similarly priced homes in the other locations mentioned above. Due to the stronger rental returns achieved in many of these ‘beachside’ locations, investors continue to see strong appeal in them. Given this competition from the investor market, some owner-occupiers wanting to purchase in the east have started looking at suburbs such as Maroubra and Kingsford for more affordable alternatives. 

Apartments 

Sydney unit values increased by 1% over the 12 months up to the end of the September quarter, with the median price sitting at $458,000. Currently, the typical Sydney unit is returning a gross yield of 5.2%, although such a figure is more representative of studios and one-bedders. pic: Bourke St, Surry HillsDuring the past five years, Sydney’s apartment rental rates have increased at an average annual figure of +6.8%. Gross rental yields had been easing over much of the last two years, however as capital value growth slows, these yields are starting to increase again making the apartment market more attractive for investors.

After a reasonably solid start to the year, sections of the lower North Shore stalled in the final three months, especially in the sub-$800k market.  Whilst the buyers are out there, they are in much lesser numbers than 10 months ago. A good quality 2 bedder in this part of Sydney should usually find a buyer in three weeks; currently it is taking up to six weeks. As the year came to an end, there was a drop in the number and quality of apartments on offer as vendors were less confident about securing a strong price. In October 2010 there were up to 60 two bedroom apartments listed in the Cremorne/Neutral Bay area whereas this year there were only 25. As an interesting side note, less expensive apartments in Waverton and McMahons Point outperformed those on the Neutral Bay/Cremorne side of the Harbour Bridge.

As a group, the inner ring suburbs of the City of Sydney Council area held their ground year on year. There were some standouts in this group with Surry Hills leading the charge. This area continues to grow in popularity as quality bars, shops, restaurants and businesses emerge on a weekly basis, especially in the area around Bourke and Crown Streets. We are seeing an increasing number of buyers who will ‘only’ look in Surry Hills with no interest in adjoining suburbs. Another area that performed well is Camperdown. A number of new residential developments have been built here in recent years which continue to attract both owner-occupiers and investors due to the proximity of the CBD and Sydney University. This year was the seventh consecutive year Camperdown’s median price for apartments had grown. 

pic: Potts PointUpper end apartments ($3m - $7m) in Potts Point struggled with some estimates seeing them down 10% - 20%. The market for mid-range apartments (up to $2m) remained flat throughout the year, but the performance of units under $700k kept the suburb's overall figure in positive territory.  Looking further to the east, Darling Point enjoyed a strong resurgence as it becomes increasingly popular with a younger demographic. It has a much higher apartment median price than most suburbs ($1.2m), but offers proximity to Edgecliff Station and the CBD. Many of its apartments have harbour views and parking remains relatively easy for those not having a formal space on title. On paper, Rose Bay may appear to have performed below expectations with a median price of $665,000 down from $760,000 last year. However, it should be noted this year's figure is still close to 15% higher than achieved in each of 2008 and 2009.

 

Recent Sales Of Note

52a Wunulla Rd, Point Piper

$15m on Nov 17
584sqm
3 bed, 4 bath, 2 car, pool

Five year old waterfront home with jetty. Effectively only a 2 bed home. Had been on market since Sept '09 with initial expectations close to $20m.

20 Edward St, Woollahra

$2.4m on Dec 7
276 sqm  
4 bed, 3 bath, no parking 

North facing house overlooking Cooper Park but required internal updating. On busy Bathurst St corner with significant traffic grinding up to Bondi Junction.

9 Thompson St, Tamarama

$6.6m on Sept 23
580sqm
4 bed, 4 bath, 4 car, pool

Architecturally designed home with many features including ocean views, NE aspect, 2 outdoor areas & 2 living areas in tightly held Thompson St.

39 Carter St, Cammeray

$2.71m on Nov 1 
479 sqm
5 bed, 3 bath, 2 car, pool

Impressive family home which had been fully renovated since its purchase in April for $1.81m.  Third highest sale in the suburb this year.

18 Edna St, Lilyfield

$1.45m on Nov 26
305sqm 
3 bed, 2 bath, 1 car

High quality renovation with open plan kitchen/living/dining at rear and outdoor covered deck & bbq area

10F/5 Tambua St, Pyrmont

$1.18m on Nov 10
Internal 121sqm
2 bed, 2 bath, 1 car

10th floor apartment in Stonecutters building, Jacksons Landing.  Large living area with two balconies & views to Balmain & Glebe. Previous owners only cleared $20k in 4 years of ownership.

11 Fitzwilliam Road, Vaucluse

$6m on Sept 6
1,125sqm
6 bed, 4 bath, 2 car, pool

Built in 1984, faces due north with harbour views. One of 9 houses offered for sale in this street over the past 7 months.


37 Jersey Rd, Woollahra

$2.765m on Sept 14
188 sqm
3 bed, 2 bath, 2 car 

Initial sales campaign in June sought $3.2m but home failed to sell.  Owners changed agents, with the final result being a loss of $360k on its 2007 purchase price.

21 Knox St, Clovelly

$2.7m on Nov 5 
360sqm  
5 bed, 3 bath, 1 car

Large, well built house on three levels with ocean views. Attracted a highest bid of $2.8m at its March auction which owners rejected. Finally sold using its third different sales agent.

22 Third Ave, Willoughby

$1.55m+ on Nov 15 
556 sqm
4 bed, 2 bath, 2 car, pool

Renovated single level home opening onto a level rear garden & pool. Indicative of the strong demand for quality houses in this area. 

48 Railway Pde, Annandale

$1.295m on Oct 5  
274sqm
3 bed, 2 bath, 1 car

Freestanding house with South- east facing rear opposite City West Link & close to Light Rail stop.

1/131 Ben Boyd Rd, Neutral Bay

$750k on Oct 15
Internal 60sqm
2 bed, 1 bath, 1 car

Attractive art-deco garden apartment with 2 verandahs and 90sqm of garden on title. Sold for $20k above Agent's initial estimate.

4a/73 Yarranabbe Rd, Darling Point

$3.2m on Nov 5 
Internal 143sqm
3 bed, 2 bath, 2 car

Newly renovated waterfront apartment with level access from the carpark & views of the harbour to the city.  Sold prior to auction.

21 Campbell Ave, Paddington

$1.185m on Nov 3
121 sqm  
2 bed, 1 bath, 0 car, pool

Fully renovated, north facing, narrow terrace on the border of Paddington/Darlinghurst with a rare pool. 



24 Cross St, Bronte

$2.8m on Oct 25 
407sqm
5 Bed, 2 bath, 2 car

Selling prior to auction, this was a strong result. This street has witnessed some good sales over the past 18 months. Reasonably close to the beach, however adjoining houses inhibit ocean views. 

26 Moruben Rd, Mosman

$6m on Aug 25 
1,072sqm
6 bed, 3 bath, 3 car, pool

Large federation family home with stunning views over Balmoral.  Required some internal work.  Would have brought $7m prior to the GFC.

22 Herbert St, Summer Hill

$1.16m on Nov 5  
387sqm
3 bed, 2 bath, 1 car 

South facing semi with an extra living area opening onto the lower garden at the rear. A good sized block. 

10/31 Addison Rd, Manly

$1.055m on Nov 8
Internal 113sqm
3 bed, 2 bath, 2 car

Oversized top floor apartment with fantastic harbour views. Three bidders fought for this at the Auction with the result more than $60k above the sales agent's expectations.


pic: Tram Scroll Auctions


Sign of the times

There has been a shift in the method of sale used by agents this year. In early 2010 when three to four buyers were competing on many properties, Auction was the preferred form of sale. Currently there tends to only be one interested person willing to participate in this manner, so agents have needed to change their course of action. 

Especially in more affluent suburbs such as Mosman, Cremorne, Bronte, Vaucluse, Bellevue Hill and Woollahra, “Expressions of Interest” or “Forthcoming Auction” are being used as the means to commence a campaign. This strategy enables the sales agent to gauge market interest for a property without any obligation to sell. Should demand not materialise, or if the offers put forward are below expectations, the details can be kept under wraps to protect the future ‘value’ of that property. 

The auction environment is just not working in today's market with more than half of those put up for sale not selling under the hammer. Sales agents are therefore doing whatever they can to secure a sale in advance of auction day. Often this involves creating an impression of strong demand when in fact none exists or eluding to a pending offer which never eventuates. However for those who have done their homework on the property and the real level of competition, the decision to sit back and not play the agent’s game is much easier. 

Buying well in this market is not so much about knowing when to jump in, as holding your nerve and not going off too soon. In today’s market, that approach will win the day more often than not. Despite what you may be told, a sales agent's role is to do their best for the vendor - not the buyer. 

Pic of Chalk Road Homepage


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.
pic Chalk Road year of 2012


Our thoughts for 2012

Market analysts regularly have differing and at times, contrary views on where the property market will go. 

Our observations are derived directly from the coal face, having spoken to many buyers, sellers, valuers and sales agents across Sydney over the past 12 months. So for what it is worth, these are Chalk Road's thoughts about the next 12 months:

  • Whilst interest rate cuts will help buyer confidence levels, economic uncertainty will dominate people's behaviour above all else
  • The quality of property available in Autumn 2012 will be higher than was offered in Spring 2011
  • With an increasing queue of buyers who have been sitting on the sidelines since mid 2010, there could be a scramble when better quality homes hit the market
  • The very top end of the market will remain soft
  • Vendors in the middle sector will become more realistic and accept the new market value of their home.  This segment should offer some of the best buying opportunities in 2012
  • Good quality apartments with all the right ingredients will continue to trade well 
  • It will still be "Advantage Buyer", enabling those on this side of the equation to negotiate hard on elements such as price, extended settlements, reduced deposits





Pic Chalk Road Christmas Tree


Season's Greetings

Chalk Road wishes you and your families the very best for a very happy Christmas and a healthy, fulfilling and successful 2012.  
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.
Copyright © 2011 *|LIST:COMPANY|*, All rights reserved.