Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
I caught up with Sydney Buyers Agent Chris Curtis, of Curtis Associates and we discussed the state of the Sydney property market.
NOTE: Despatches is an acceptable alternative spelling!! But Microsoft keeps wanting to correct to Dispatches, so I capitulated in this text…
We discuss the status of the Sydney property market with Buyers Agent Chris Curtis
Sydney home price falls are now featuring in the main stream media. Of course average price falls may not fully tell the story, as more expensive property is dropping faster, whilst demand for cheaper options remains strong.
Nine News ran a segment last night.
The cracks are beginning to show in the Sydney property market, with the inflated prices from six months ago dissipating.
In some suburbs, prices have fallen as much as 30 percent, as the median house price copped its largest knock since August 2008.
In the three months to December, the harbour city’s median house price fell 1.3 percent, tumbling a further 2.5 percent in the following three months to March, CoreLogic data shows.
It’s the steepest drop in a decade, with the average price of a home now priced at $880,743.
CoreLogic’s Kevin Brogan said the tide was slowly turning.
“I don’t think there’s any cause for panic,” he said.
“At the moment it’s trending towards being a buyer’s market, but I think what we’re seeing is quite a gradual adjustment to the market.”
Experts say a crackdown on investor loans, increased stock and the curbing of tax benefits has contributed.
Over the past fortnight, the auction clearance rate dropped to just 56.1 percent.
Compare that to this time last year, when 78 percent of homes were selling.
Yesterdays Daily Telegraph newspapers also painted a picture of gloom:
A brief segment broadcast today on the Nine network, using the data from our mortgage stress surveys.
Here is our Greater Sydney mapping in detail. Read more here.
Following our October 2017 Mortgage Stress update, here is a map of the count of households in mortgage stress in Greater Sydney, using our Core Market Model.
Here is a list of the top 10 most stressed post codes in the region, by the number of households in stress.
We will post similar maps and lists across the other states shortly.
Three years after New South Wales’ housing minister announced that all 579 public housing tenants in Millers Point, Dawes Point and the Sirius Building would be moved within two years and their homes sold, only 24 tenants are still resisting the move. So far, 151 properties have been sold for A$400.89 million, with a median sale price of $2.44 million.
One 90-year-old said others looked out for him in the Sirius Building. In his new housing, he feels utterly isolated. Ben Guthrie/AAP
The NSW government would argue that these statistics indicate the displacement has been a great success. But, drawing on 40 in-depth interviews I conducted with tenants, the displacement has been a monumental policy failure on various levels.
Let’s begin with the justifications for the displacement. The NSW government’s main justifications were that the homes were expensive to maintain and that the escalation of house prices in Millers Point represented an opportunity to raise $500 million that would be used to build 1,500 additional social housing dwellings.
Tenants interviewed were adamant that maintenance was negligible. Many spoke about maintenance requests being ignored or the work done being so shoddy that the problem was not fixed or promptly recurred. Many felt that a deliberate policy of neglect had been one of the key strategies to encourage tenants to move.
Doing the sums
The high cost of maintenance certainly cannot be used to justify the planned sell-off and destruction of the Sirius Building.
The age and concrete structure of the building mean that the maintenance costs per unit are probably lower than for many other public housing complexes. It is 35 years old – the average age of social housing properties in NSW is 45 years – and in good physical condition.
The government’s promise to use the sale proceeds to build 1,500 social housing homes has been its central justification for the displacement. On the surface, this appears reasonable. However, there are a several issues with this argument.
First, the actual number of additional homes will be closer to 1,100 as at least 400 homes have been lost in Millers Point and the Sirius Building.
Second, tenants posed the obvious question: why should public housing be financed by the sale of public housing? The massive increase in house prices in Sydney has resulted in a stamp-duty bonanza for the NSW government – around A$9 billion in the 2016-17 financial year.
The government is awash with cash. A surplus of around $4 billion is predicted for this financial year. Surely some of this money could have been used to reduce the scandalous public housing waiting list of more than 60,000 people.
Another question tenants raised was: why the rush? Why was it necessary to sell all the homes as soon as possible? It is highly likely that property prices in the area, within walking distance of the Sydney Opera House, will continue to increase.
If we accept this proposition, then the government could have compromised. It could have allowed tenants who were vehemently opposed to moving to stay, and sold off the homes of tenants who did not mind relocating.
‘Like leaving your family’
The main argument against the displacement is not so much the questionable financial justifications, but the devastating human cost.
Although some tenants were happy to move, the removal process and subsequent displacement has been traumatic for many. Tenants who had strong social ties in Millers Point and Sirius have been moved to areas where they know no one.
I interviewed a tenant who was moved out when he was 90. In the Sirius Building he knew a couple of people and his fellow tenants looked out for him. In his present housing complex he is totally isolated.
Another tenant interviewed was 85 when he was moved. He said that leaving Millers Point “was like leaving your family”.The actual removal process was seriously flawed. Tenants were aghast that it was to be a blanket removal – those who were born in the area, were frail or had lived in the area for most their lives were to be forced out. Tenants had no choice but to move.
They were told that if they did not accept two “formal offers” of alternative accommodation, their public housing status would be terminated. This would have rendered most tenants homeless.
The total lack of consultation was particularly unfortunate. Tenants had no warning prior to the announcement. After making the announcement, the minister responsible, Pru Goward, refused to meet the residents. Her successor, Gabrielle Upton, also ignored requests for a meeting.
To his credit, Brad Hazzard, who replaced Upton in April 2015, met the working party representing the tenants and spoke to some of the older tenants. He was reportedly “persuaded, over scones and cream in residents’ homes, by their argument that it would be ‘a huge challenge’ for the elderly to move out of the area”.
The minister managed to persuade the NSW Treasury to fund the refurbishing of some existing properties. In November 2015, 28 apartments were made available for the 90 or so Millers Point residents who had not yet moved.
Unfortunately, yet again there was no consultation; 24 of these apartments are small one-bedroom apartments that are not suitable for most of the older residents who need an extra room for a carer and/or family visiting.
Social harm is irreversible
The displacement is also destroying an area of great historical significance. In 1999, the whole of Millers Point was declared a heritage site. The statement of significance said:
Its unity, authenticity of fabric and community, and complexity of significant activities and events make it probably the rarest and most significant historic urban place in Australia.
The displacement has exacerbated an already deep and growing spatial divide between rich and poor in Sydney. The social mix that was a feature of Millers Point has been obliterated along with its rich history.
The 24 remaining tenants are still hoping that the government may show some compassion and let them age in place. It’s a long shot, but it would be a marvellous and humane gesture.
A segment today from Channel Nine featured the latest data on Sydney residential property, and featured data from the Digital Finance Analytics mortgage default heat mapping, as well as the latest from CoreLogic on Home Prices.
From The Real Estate Conversation.
The Greater Sydney Commission, which is headed up by Lucy Turnbull, has released its draft district plans outlining targets and priorities across Sydney’s six districts for the next 20 years.
The Greater Sydney Commission has released its draft district plan with a 20-year vision for each of Sydney’s six districts.
The plan sets out how the priorities outlined in the ‘A Plan for Growing Sydney’ report can be achieved in practical terms, and includes a 5-10 per cent affordable rental housing target for low and very low income households in all new residential developments across Sydney.
The plan also outlines a vision for a ‘green grid’, a network of parks, bushland, waterways, green street canopies, and walking and cycling paths across the city.
The Commission’s plan is to transform Sydney’s six districts into three cities: the Eastern City, the Central City and the Western City, with each city liveable and productive in its own right.
The Commission has also launched a Greater Sydney Digital Dashboard, an online tool that will allow better monitoring of the growth and changing face of Sydney with a view to making better planning decisions.
Visitors are able to enter their suburb name into the website, and view their relevant district plan and related documents.
With Sydney forecast to have a population of 6 million by 2036, better urban planning is essential.
“Greater Sydney is a mosaic of great places, and we’ve collaborated with the community, peak interest groups, businesses, and all levels of government to build concrete plans to make those places greater,” said Greater Sydney Commission’s Chief Commissioner, Lucy Turnbull.
Greater Sydney Commission CEO Sarah Hill said, “By early 2018, for the first time in many decades, our aim is that final land use, transport and infrastructure plans will be aligned to provide a strong platform for Greater Sydney.”
The plans will be on display until the end of March 2017. The Commission will be leading a public discussion about the plans until then, and encourages submissions.
To view the documents click here.
To visit the Greater Sydney website visit here.
To make a submission click here.
From The Real Estate Conversation.
Sydney’s property auctions make great conversation starters at barbecues because even with the peak of this cycle behind us, the embers burn on. For example, this past week saw 206 sales on 253 auctions for a clearance rate of 76%, according to Domain Group.
The result marked the third week in a row Sydney’s had a clearance rate of at least 75%, a buoyant level of buyer interest despite it being winter.
City wide numbers can be misconstrued in a big city like Sydney, however, where auction results tend to differ between east, west, north and south. For instance, in the last decade or so, there’s been a shift by affluent couples and families toward the city’s inner west and this has seen rapid price growth in suburbs like Haberfield and Concord.
The median house price in both Concord and Haberfield is $1.9m, according to REA Group, which is very high when you consider that the median auction price across the city is usually around $1.1 – $1.2m, as per Domain’s numbers.
Similarly, the upper north is increasingly popular among young families due to schools in the area. This heightened competition is helping fuel capital growth in suburbs where prices were once deemed affordable.
For example, the median house price in St Ives, about 20 kilometres from the CBD, is now $1.75m, almost 100% higher than it was in 2006, as per CoreLogic RP Data. So understanding the popularity of certain pockets like this is crucial to putting those broader numbers in context.
Not enough to go around
Take Corelogic RP Data’s break down of Sydney auctions by sub-region a fortnight ago. It showed that sales rates were strongest in Blacktown (90%), the City and Inner South (87%), Eastern Suburbs (82%), North Sydney and Hornsby (84%), Northern Beaches (91%), Ryde (87%) and Sutherland (89.5%).
All are much higher than the overall clearance rate of 75% and suggest a very distinct problem for Sydney: there simply aren’t enough houses to meet demand where people want to live. It’s a situation that’s inflating median prices and creating a sense of urgency among prospective buyers.
Current listing figures support this. For example, new listings in the month to July 10 were 5,148, down 33% on 12 months ago, CoreLogic RP Data reports. Total listings of 19,087 are down 10% on 12 months ago. Keep in mind that a new listing is one that’s not been advertised for sale over the past six months, while total listings include new listings and properties that have been previously advertised.
Buyers’ agent at Rose and Jones, Stuart Jones says that supply is generally 25 to 35% lower than the same time last year, depending on property type.
He notes that home ownership and rental demand for quality property is particularly high in suburbs within three to five kilometres of the CBD, mostly due to proximity to trains and ferries, schools, hospitals, workplaces and a variety of lifestyle amenities.
“Persistent high prices have primarily been driven by a chronic short supply of quality property in the established markets, that is older suburbs with higher barriers to entry for new supply,” says Jones.
“There are still investors left over from the top of the lending cycle who are finance approved and chasing quality assets. As a result, there is still buyer depth from existing and new entrants in these core markets.”
Jones says that challenges in global markets like stocks and bonds are also helping turn many investors to property.
Cheap money
Of course, many other buyers are simply lured by the idea that getting a home loan has never been easier.
CoreLogic RP Data’s head of research, Tim Lawless says that ongoing growth has been helped by the cheaper cost of mortgages, which has come about with record low interest rates over the last few years (1.75% as of July).
“The challenge for policy makers and regulators will be to ensure lower mortgage rates don’t refuel a higher rate of growth in the Sydney and Melbourne housing markets where affordability is already stretched and rental yields are pushing to new record lows each month,” says Lawless.
While affordability is really a relative term, it bears significant meaning in Sydney, often at those aforementioned barbecues. After all, a median auction price of $1.2m might be considered affordable by some, especially in a city where $2m and $3m price tags have become so normal.
