Sydney Property Market Update December 2020

When we look back to the start of 2020, we had just come through a horrific bushfire season while COVID-19 was still mainly confined to China and not really on our radar. So much has changed in our lives over the course of the year and property markets around the country looked like they were headed for another hard fall after less than a year of recovery since the previous downturn.

In February we made our predictions without any expectation of the impact the COVID-19 pandemic would have on our lives and our economy. We predicted new listings would increase in the first half of 2020 which would start to see price growth begin to moderate from the cracking pace set in the final quarter of 2019. We started 2020 with Sydney values sitting about 6.4% below the 2017 peak and we were expecting prices to move past this peak in the second half of 2020.

So, our predictions did not quite pan out, as the external shock that occurred a couple of months later put significant downward pressure on property prices.

The Sydney residential property market is a resilient beast however and while sales transactions dropped off significantly during the months following the lockdowns in late March, prices continued to hold up far better than many were predicting.

Whilst price movements were not uniform across different localities, price points and property types, Sydney property values fell by approximately three per cent from late April through until the end of September. October saw prices level out at the start of the month and begin to increase slightly by the end of the month. According to CoreLogic, by mid-November prices had increased by 0.3 per cent over the previous four weeks and on the current trend, Sydney prices are likely to see a two per cent increase over the course of 2020. That is something few would have predicted back in April.

While a decrease in supply helped hold up prices throughout autumn and early winter, by mid-winter, listings and sales activity began to increase after COVID-19 restrictions continued to ease. By October, Sydney has seen annual sales volumes increase by 12.5 per cent over the year according to CoreLogic. Spring auction volumes were on par with 2019 and clearance rates returned to above 70 per cent. Despite the increase in sales volumes, total listings are down by 6.5 per cent as at mid-November compared to the same period last year.

In general, houses performed better than units with investor grade units, particularly in areas with a large recent supply of new units, experiencing the Hedonic Home Value Index showed houses having a year to date increase in value of 1.9 per cent, with units at 0.7 per cent.

The middle part of the market saw the largest decreases as prices eased. The lower end was propped up by first home buyers, while the top end, particularly at the prestige level, saw strengthening activity as the year progressed as buyers looked to upgrade.

North-West Sydney

The last quarter of 2020 is trending to finish up strongly within the north-west region of Sydney. Local agents confirm that good quality assets have seen an increase in demand with an uptake of property enquiries and registered bidders at auctions.

There are a few reasons for this, including: the north-west has always been a traditionally resilient market; pent up demand from months of uncertainty and a city-wide lockdown; increasing levels of consumer confidence; larger block sizes with landscaped backyards and detached dwellings being more appealing; recent infrastructure upgrades to transport hubs; quality schools; and historically low interest rates.

Generally, this region was travelling well at the start of the year. During COVID there was limited market activity and in recent months the market has begun to improve.

A recent example is 6 Claxton Circuit, Rouse Hill. The property is a semi-modern, five-bedroom, twobathroom, three-car garage dwelling with a below ground pool, purchased for $1 million in March 2019 and re-sold for $1.32 million in November 2020 with no major renovation works done to the property since the previous sale. Another example is 30 Kiewa Grove, Gables. The property, which comprises a 2019 architecturally designed dwelling comprising five bedrooms, four bathrooms, two-car garage with a below ground pool, sold at a suburb record of $1.52 million in September.

In North Kellyville, 3 Kurnell Place, a 2018 architecturally designed dwelling comprising four bedrooms, five bathrooms, two-car garage with a below ground pool, sold at the top end of the market for $1.92 million in November.

In Northmead, 26/2 Rifle Range Road, a circa 1997, three-bedroom, two-bathroom townhouse with a double garage, sold at auction in November for $1 million, a record sale for a 1990s three-bedroom townhouse in Northmead. The property features older updates internally, a landscaped courtyard and a modern inground pool. The townhouse is unique given the modern inground pool in the rear yard, a feature not seen before in the local area.

South-West Sydney

Winding back the clock to the start of 2020, we predicted the high growth seen in the last quarter of 2019 would be difficult to sustain in 2020. We were right, but not for the reasons we thought would be the driving factors. Instead the COVID-19 pandemic hit the south-west and took the market on a different journey.

The growth centres around Austral and the Aerotropolis as expected saw some strong gains with developers and land bankers returning to the Austral market after some 12 months of very limited activity, albeit at price points well below the highs seen in 2017 and 2018. The Aerotropolis saw some big progress towards what has been envisaged as a major employment hub with the gazettal (1 October 2020) of the State Environmental Planning Policy (Western Sydney Aerotropolis) 2020. This provided some much needed direction for the precinct which in turn saw an increase in interest from developers and landbankers.

The residential markets were a bit of a rollercoaster. When COVID-19 hit, media reports and articles painted a grim picture. However the extent of price drops, if any, were never really seen. Agents did report a drop in listings, overall interest and longer selling periods however certain price points (sub $800,000) did not seem to be impacted while the higher end markets experienced a small drop, with sale prices generally just below listed prices.

An example of prices remaining strong at the start of the year can be seen in a townhouse complex in Green Valley. A three-bedroom, one-bathroom townhouse in the complex sold in May 2019 for $477,000, followed by a similar three-bedroom, one-bathroom townhouse in the same complex in March 2020 for $520,000.

More recently, a modern home in Oran Park sold in November for $820,000 after previously selling in July 2019 for $765,000.

The last quarter of 2020 has really been about first homeowners. With another cut to interest rates and various government grants and initiatives, the market has seen these buyers return in droves with the intent of buying. Agents are reporting strong results in that sub $800,000 market as buyers fight for any quality stock.

A house in St Helens Park sold in November for a strong $660,000 and was on the market for a matter of hours, not days.

Northern Beaches

The overall prediction of business as usual didn’t quite go to plan. It has been a rollercoaster of a year, particularly for the Northern Beaches.

The market began 2020 similar to how it finished 2019 with continued growth across all value levels. The uncertainty and negative media speculation surrounding COVID-19 certainly slowed the market although surprisingly, values remained fairly stable. The market really showed its resilience once the dust settled and everyone adjusted and accepted the new norm. We have experienced high levels of demand and capital growth to finish the year off strongly.

The Northern Beaches has really benefited from COVID-19’s reshaping of working environments and giving people the opportunity to work remotely. Realestate.com.au released the most popular suburbs for prospective buyers in Sydney with Newport (second), North Narrabeen (third) and Collaroy (sixth) all featuring in the top ten – really highlighting current buyer demand. Another example of the underlying strength is the sale of 5 Darius Avenue, North Narrabeen. The knockdown sold for $1.93 million at auction on 31 October 2020.

To put the sale into perspective, the neighbouring property at 3 Darius Avenue sold for $1.49 million in September 2016 and another nearby property at 12 Lake Park Road, North Narrabeen, sold for $1.62 million in February 2020.

Inner Sydney/Eastern Suburbs

Aside from the unforeseen circumstances of the COVID-19 pandemic, our predictions of 2020 being a strong year for first home buyers have proven accurate. The First Home Loan Deposit Scheme has improved the perception of access to the market for first home buyers and low interest rates have made repayments affordable for many young professionals.

Recently completed infrastructure projects improved the amenity of areas such as Surry Hills and Kensington, with values in the area remaining particularly resilient throughout the pandemic, particularly in the owner-occupier market segment. An example is 14 Richards Avenue, a renovated four-bedroom terrace with parking on one of the suburb’s best streets, which sold in the first week of lockdown in March for $3.8 million.

After being a poor performer in 2018 and 2019, values in Pyrmont were tipped to improve in 2020, however the pandemic has caused this largely investor market to, at best, remain stable. A unit at 7/4 Tambua Street recently sold for $906,000 reflecting an average of two per cent per annum growth since its previous sale for $823,000 in 2015.

The first quarter of 2020 was full of optimism with strong prices being achieved across the board, particularly within owner-occupier dominated market segments, including good quality units, townhouses and dwellings. 5 Rowena Place, Potts Point, a two-bedroom townhouse in the city’s inner east sold in February 2020 for $1.405 million, almost $150,000 more than the previous sale in the complex in 2018 – during which the broader market had remained volatile but at a similar level. Strong results such as these appear to be driven by low interest rates and generally positive market sentiment.

In the second quarter of 2020, with the onset of COVID-19 and its social distancing rules and restrictions placed on mass gatherings such as public auctions, the market began to slow and volumes began to decrease. Demand waned as buyers began to exercise caution amidst uncertainty and agents reported longer listing times and reduced competition. Speculation that investors would be forced to sell off en masse swirled and bargain hunters began to circle. Thankfully these fears did not eventuate as broadly as initially thought. Some investor units did hit the market for a loss, such as 9/71 Renwick Street, Redfern, a one-bedroom unit with parking which was purchased off the plan in September 2015 for $820,000 and resold in May 2020 for $768,000.

As COVID-normal was achieved in the third quarter of 2020, a new market normal also emerged. Auctions returned and so did buyers and sellers. Many inner city agents reported record sales volumes in August and September (although notably not always record results). The owner-occupier market sprung into life as upsizers took advantage of record low interest rates and many professional and older couples sought to take their new found work from home lifestyle (and Sydney salary) to more affordable regional areas. This was the case with 55 Bowman Street, Pyrmont, a four-bedroom townhouse in Jackson’s Landing, which achieved a strong result of $4.14 million during the height of the market boom in April 2017 and resold in August 2020 for $4.35 million.

Whilst the owner-occupier market has regained some of its positivity, large rental decreases across inner city areas have caused the investor market segment to experience longer selling periods and lower returns, particularly in areas with extensive supply pipelines such as Green Square. 226/2 Powell Street, a one-bedroom unit in Waterloo, sold for $625,000 in September 2020, $10,000 less than its previous 2016 sale price.

The fourth quarter of 2020 has seen this sentiment continue with owner-occupier properties achieving premium results and investor units lagging behind. After a new kitchen and cosmetic updates, 306/357 Glenmore Road in Paddington, an owner-occupier two-bedroom unit in a sought after warehouse building sold for $1.77 million in October 2020, after previously selling in April 2020 for $1.595 million. We have been surprised by the resilience of the inner-city owner-occupier market, with multiple strong results as previously mentioned. Whilst these are not limited to a specific area, they are clearly differentiated by their price point and target market.

Inner West

The general market in the inner west of Sydney had experienced strengthened conditions in the months prior to the Coronavirus pandemic. From March until August and September, the market appeared to flatten or decline and a significant reduction in sale transactions occurred. In more recent months, the market has significantly strengthened especially in the dwelling market. The easing of restrictions as well as the low interest rate environment have increased buyer demand in most parts of the inner west. In saying this, there are still mixed results which would indicate that the market is still experiencing some volatility.

The most significant increases in capital growth were dwellings above $1.5 million. Balmain has performed strongest in the region with strong results experienced throughout the year, even during the pandemic. That bullish sentiment has been amplified in recent months with even stronger market conditions.

Areas with high density strata units such as Homebush, Camperdown, Erskineville, Lewisham and Summer Hill, where supply outstrips demand, saw the least movement in capital growth, and in some cases a decline in capital values. The rental market has been significantly impacted by the Coronavirus pandemic, which in turn is impacting overall value in these investor markets. Buildings which have been completed to a higher standard and attract owner-occupiers have been less affected by the decline.

A few sales provided some surprising results, the first being a recently completed duplex at 9 Thornley Street, Leichhardt for $2.7 million in November. This result is extremely strong for a duplex in Leichhardt.

Another surprising result was the sale of 57 Victoria Street, Lewisham for $2.61 million in October, significantly higher than the sale opposite of a comparable property at 42 Victoria Street, Lewisham for $2.3 million in November 2019. 144 Cardigan Street, Stanmore which sold for $3.336 million in September also far exceeded vendor expectations.

It was surprising to see the rebound towards the latter part of the year, especially the strength of the rebound which can be attributed to the lack of stock for sale throughout the year, as well as the historically low interest rate environment.

Southern Suburbs

This time approximately 12 months ago, we were discussing the tragic impacts of the bushfires within New South Wales and across the country, the strong property performance over the final few months of 2019 and our thoughts on how the 2020 property market would play out. It is astonishing to reflect back and realise that the full impact of the Coronavirus pandemic was just around the corner. At the time, our expectations were that the majority of properties across this region would continue to perform well throughout 2020, particularly houses and lower density style developments such as townhouses. The exception to this was high density apartments within oversupplied pockets such as those in Miranda, Kirrawee and Sutherland, for example.

As we moved into the early months of 2020 and felt the full impacts of the COVID-19 lockdown period and associated restrictions, we saw the property market almost come to a halt particularly during April and May. In saying this, while market activity slowed significantly, property prices only appeared to have weakened slightly around this time as people appeared to take a longer term view and not sell unless they had to.

Something that became evident during the pandemic was the trend of people wanting more space, whether that be to just have a back yard and be within a quieter area within the same region or potentially moving to a regional area as working remotely meant that commuting to the CBD and other major areas was no longer a critical requirement when purchasing property. This is in direct contrast to what we were previously seeing with the trend of people wanting to live in built-up areas closer to transport, services and amenities in order to improve accessibility and work-life balance.

The rental market was impacted to a greater extent given that tenants were seeking rental reductions or unable to pay rent if they had been significantly financially impacted due to COVID-19. The weak performance of the rental market in general has directly impacted investment style properties such as apartments in particular. As investors withdrew from the market, we observed first home buyers and owner-occupiers seeing this as an opportunity to return to the market. Combined with incentives for first home buyers and historically low interest rates, property prices have remained stable in most cases and there has been evidence of some property types and locations seeing slight value increases as we moved into the final months of 2020.

Some of the premium suburbs within the Sutherland Shire such as Cronulla, Burraneer and Greenhills Beach have witnessed some extraordinary results including a substantial waterfront property in Burraneer which sold just above $9 million and a near new high quality home within a newly developed estate (Greenhills Beach) that recently transacted for a little over $4.5 million, setting a new record for the estate

Prestige

Last month’s issue was dedicated to the prestige market and we provided an in-depth look at how that sector of the market had performed so far in 2020.

The year can be broken up into three parts when looking at how the prestige market has performed. The January to March period, pre- COVID, saw the strong finish to 2019 continue, with good activity and sales results being achieved. As the lockdowns commenced, market activity plummeted and from April through to July, prices remained steady, with demand still reasonably strong for properties put to market or sold off-market.

By August there was strengthening activity in the market, with those who had put off selling during autumn now having the confidence to sell as it became clearer that the property market was holding up far better than expected. Prices appear to be strengthening as buyers take advantage of historically low financing costs to upgrade to a home more suitable to their changing needs, with many now looking for options which incorporate living requirements with the ability to work from home. As a result of the COVID-19 impact on many overseas countries, many expats are also looking to return to Australia which is adding to the demand in this price sector.

There have been a number of record suburb sales in 2020 with a price tag of at least $3 million, many of which we referenced in our previous issue. Many of these sales happened prior to April or after July, however there were a few which occurred during these months, highlighting how high quality properties were still in demand when the general market was at its softest. The inner city and inner west managed a number of record suburb sales including in Alexandria, Surry Hills, Newtown, Balmain, Petersham, Concord and Earlwood. In the eastern suburbs, a slew of suburbs had their record price broken this year including Woollahra, Waverley, Randwick, Bronte, Clovelly, Kensington, Little Bay and Pagewood. Darling Point also saw its record sale price equalled in early March with the sale of 4 Lindsay Avenue for $32 million.

On the north side of the harbour, suburbs such as Newport, Terrey Hills, Middle Dural, Lindfield, Roseville, Riverview and Wollstonecraft all managed new records. In the St George area, Blakehurst, Connells Point, Lugarno and Kingsgrove all had record sales, as did the Sutherland Shire suburbs of Illawong, Oyster Bay, Sylvania and Greenhills Beach. There was also the Australian record auction result set in Vaucluse in September when a large modern home with tennis court and gun barrel harbour views towards the Harbour Bridge and city sold for $24.6 million, eclipsing the previous auction high of $23 million set in 2009.

In the inner city suburb of Pyrmont, the Sydney Wharf complex has reportedly had an apartment sale record. The record selling price is rumoured to be around the $20 million mark, although the exact sale details have not yet been disclosed by the selling agent. This penthouse apartment is positioned at the end of the wharf and appreciates surrounding water views from multiple rooms. The apartment comprises five bedrooms, high-end accommodation, with an approximate internal area of 350 square metres and a private roof terrace with plunge pool.

In the first edition of our Month in Review publication this year we mentioned the possible record breaking property in Mosman at 2 Rosherville Road. It appears that this property was withdrawn from the market in June, at the height of the volatility surrounding COVID-19, after being on the market for close to 12 months. As a sign of the returning confidence in the prestige market however, 16 Iluka Road, Mosman was last month introduced to the market with a price guide of $33 to $35 million. Should this property sell anywhere close to this mark, it will significantly surpass the current Mosman sale record of $25 million.

Matthew Halse
Director