Join our investing community

Sydney affordability improved

Discussion in 'Real Estate' started by Jacque, 5th May, 2006.

  1. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Mrs Cristine Castle, said statistics released today by the REINSW and Australian Property Monitors, show that there has seldom been a better time to buy residential property in Sydney.

    The sales volume of houses has increased 28.5% on last year’s March Quarter and the number of units sold has increased 12.5% across the city.

    “The affordability of houses and units across most of the State is attractive at the moment. The median house price in Sydney is now just $516,000 and the median unit price is $358,000 which represents great value,” Mrs Castle said.

    The statistics reveal that the median price for houses has eased 1.1% on the December quarter 2005 and is 3.8% down on the March quarter last year. Unit prices have also eased 1.4% on the last Quarter and are 3.3% lower than last year, which has encouraged buyers, particularly owner occupiers, to snap up good prices.

    “What is interesting is the suburb to suburb variations, which means house hunters have plenty of opportunities to find well priced homes and strangely enough it also means that sellers in some areas are enjoying modest price growth and an abundance of buyers.”

    “For example, in areas like Manly median house prices are up more than 10% on last year and turnover is up 75%. In other areas like Canterbury median prices have fallen by 2.8% and turnover is up around 12%.”

    Buyers hunting units may find even greater bargains with median unit prices in some highly sought after suburbs showing great affordability.

    “For people wanting a unit in Mosman or the city there has probably never been a better time to buy. Median prices have fallen between 15 and 18%, which means good buying in anyone’s language,” Mrs Castle said.

    REINSW media release May 5th 2006
     
  2. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Jacque,

    You know I love your work, but that article is a load of codswallop isn't it! First of all its the REINSW so they have a heavily weighted vested interest at play. Then silly lines like:

    "The affordability of houses and units across most of the State is attractive at the moment. The median house price in Sydney is now just $516,000 and the median unit price is $358,000 which represents great value."

    Comments like those are just laudible. How can a median price in isolation have any bearing on affordability? What's the median income in those postcodes? What's the prevailing mortgage interest rate? There's no way known I'd call more than half a million for a house affordable to most. She's talking up the market on the back of the interest rate rise to try and resurrect a dying beast. Fortunately, I don't think it will work as the vested interest is far too obvious.

    That whole artile is one big REI sales pitch.

    I hope the poor punters out there aren't silly enough to believe it...

    And this: "For people wanting a unit in Mosman or the city there has probably never been a better time to buy. Median prices have fallen between 15 and 18%, which means good buying in anyone’s language."

    If it weren't so laughable it would be painful. "never been a better time" my rotund posterior! ;) In fact check out the following link to show the true picture on affordability for anyone who really cares:

    http://wopared.parl.net/library/pubs/mesi/mesi54.htm

    I'm tipping pretty much any time pre-2003 would have been a "better time to buy" than today. What a crock!

    Cheers,
    Michael.
     
  3. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Naturally, articles put out by institutions such as REI and the HIA are going to be slanted. I agree :D After all, someone has to talk the market up ;)
    Along with the REAs, that is :D

    And I know where you're coming from with pre-2003 prices, Michael. That's why Sydney is undergoing a period of adjustment. Affordability has to enter the equation at some time and it seems that Sydney reached past it's limit at this time (03/04). The last couple of yrs has been a much needed period of slowdown so it's not surprising to see such cg rates. Along with taxation changes and other economic factors, property hasn't performed or been viewed as a viable investment, and so continues on it's downward trend. The latest interest rate rise hasn't helped, but even Residex were disappointed in their latest March Quarterly report, stating that:

    "We were expecting an adjustment but based on the trend that was emerging we did not expect it to be of the magnitude which has eventuated. The typical Sydney house fell in value by some $12,000 to $520,500. The peak value of a home in Sydney was $570,000 in January 2004. The adjustment has been the longest and largest since the 1950's when it was about 16% and the adjustment process lasted for about two years"

    Residex stats show that cg over the last quarter for Sydney houses has been -2.24% with units faring somewhat better at 0.42%. Their models point to optimistic growth forecast for the next 5 yrs (10%+) but their stance on the current market is that it is "fragile".
    Residex do seem to take the optimistic view with their forecasted rates, I believe, so it will be telling to look back on their reports a few yrs from now to see if they were right ;)

    The happy signs are that housing rental yields are on the improve (up 7.5% from a yr ago) and housing sales activity (interestingly enough) has picked up during this March quarter and is approx 7.5% higher than a yr ago.

    My opinion (for what it's worth) is that, despite the increased rates and the doom and gloom of the media, there are still opportunities to be found for those wanting long term growth. Who knows if we've hit the bottom of the market in this cycle? Hard to say, especially with the possibility of another .25% increase on the way before the end of the year. Prices could have a little way to move down still yet. However, I do know that there are several investors selling up to move their money elsewhere (one recent example was a $35K land tax bill with the owner putting her 3 Sydney IP's on the market the following week) or to invest elsewhere. Picking the highs and lows of a property cycle is akin to speculating, and I'm still of the belief that Sydney is a terrific place to invest for growth (unless obviously overheated as it was in 03/04). The trick is to ensure you have enough buffer to see you through the lean times, you buy for the long term and you buy well.
    Let's not forget too, that despite all the facts and figures, Sydney is a big market with many micro markets within specific suburbs. Some will outperform, others will take longer to recover, whilst some suburbs seem to be immune to flat periods at any time.
    It's a big city ;)
     
  4. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    Heh, the story isn't as exciting as the local news in Brissy (or it might have been one of the dodgy current affairs programs) screaming about the uncertainty of house prices in South East Qld, accompanied by a statement that prices have 'plummetted a massive 1 per cent just since the start of the year'). I couldn't bring myself to tune in enough to see what stats they were quoting, or what the story was really meant to be about :p , but they cut to an intelligent looking blue collar type who advised "We're just selling the house mate - you're better off - its much cheaper just to rent"

    Not long after they were reporting on a world first machine that could suck all your body fat out with no surgery.

    Honestly, if it wasn't for Enough Rope I don't think I could watch any news or current affairs in this country ;-)
     
  5. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Jacque,

    I agree. In fact, if you'd like to see a positive slant on the current property market, to counter-point the negative affordability picture I painted above, then check out the following chart showing home loan activity:

    http://www.aph.gov.au/library/pubs/mesi/mesi53.htm

    That line has a really steep upwards trend. Even if you ignore the 2003 blip, the trend is still strongly positive and current lending is back to the level that we saw in the peak in 2003.

    There's certainly a lot of activity in the residential property market.

    As an aside, the median prices in my postcode have now recovered all of the losses in 2004 to be higher than the peak in 2003. So current median prices are now the highest they've ever been! Makes it hard for me to crack into the market here, but I'm still scouring. I'm hoping a rate rise or two might temper the optimism that's obviously out there for my locality.

    Cheers,
    Michael.
     
  6. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Activity certainly hasn't slowed too much in the North Sydney LGA, from what I've seen. Only two days ago a property that I had an eye on for a client sold for a record price for the street and I was amazed.
    I was banking on it being PI at auction ;) so then I could have negotiated a better price. Ah well, not to be....