The year 2015 was a huge one for house prices in Sydney, with jaw-dropping sales at auctions across the North Shore. Now local property expert Henny Stier takes a look back at what drove the market last year and reveals what’s in store for real estate buyers and sellers in 2016.
2015 Property Market Wrap-Up
What a fascinating year 2015 was for Sydney real estate. Around November-December 2014, the market was showing signs of slowing down. However when January 2015 rolled around, the market surged astonishingly quickly and took many by surprise. It was a frenzied atmosphere and buyers were paying extraordinary prices, especially at auctions. The demand for property seemed insatiable and just about anything with a roof and four walls was snapped up.
But in August, the market abruptly ran out of steam. Buyer fatigue set in and homes selling at auctions started to get passed in. Buyers just were not putting their hands up, and this was reflected by auction clearance rates hovering around 60 per cent in the last couple of months – down from the mid-to-high 80 per cent rates seen as late as July 2015. Properties began selling prior to auction as some vendors realised selling at auction was starting to become more of a gamble than a sure bet. There are however still many vendors out there whose expectations are still in the clouds as they are comparing their property against their neighbours’- who may have sold earlier on in the year when the market was stronger.
2015 saw the tightening of investor lending as mandated by the Australian Prudential Regulation Authority (APRA). Australian banks raised interest rates for property investors specifically and investors can now only borrow up to 80 per cent of the property’s value. This has resulted in more opportunities for owner-occupiers to fill the gap which investors have left.
Overall though, the Sydney market has outperformed yet again. The Sydney market went up just over 14 per cent in 2015, as compared with other major cities like Melbourne at just over 8 per cent and Brisbane at just over 3 per cent. Perth and Adelaide trailed well behind at not even 1 per cent growth this year. Those who have owned a home in Sydney for more than a few years are likely to have accumulated a sizeable level of equity in their property.
What can be expected in 2016?
2016 should be a fairly stable and flat year in Sydney real estate. Barring a global crisis, it’s unlikely a crash is looming, and certainly not on the North Shore, which has always been a very mature and established area with constant demand. In fact, there is still pent-up demand from buyers just trying to get into the North Shore and this demand should help self-regulate prices. We can already tell from the volume of inquiries we received in December alone that there are many serious and motivated buyers for this region. The North Shore certainly has never lacked property buyers in the past, and 2016 will be no different. The same can be said for the Eastern Suburbs and Inner West; but it is a different story in other parts of Sydney where the real estate markets are more first-home-buyer and investor weighted, speculative and volatile. We should always keep in mind that the Sydney property market is not homogenous.
Properties which have major flaws are no longer going to sell like hotcakes. Buyers are feeling less pressure and are biding their time to handpick only the most suitable properties. Properties which are walk-to-rail, in the catchment for good schools, and tick all the boxes in terms of accommodation and with a family-friendly backyard will still sell well and have strong competition. As an example of this, we purchased a property in Lindfield only just a couple of weeks ago on behalf of a North Shore Mum. Despite the market having weakened considerably relative to the beginning of the year, the auction had eleven registered bidders. The fact that buyers are more selective and measured is a good thing, and should not be mis-interpreted as a sign of market crashing.
The end of January and early February is when the next new batch of properties will come on the market. We can more accurately gauge the level of market sentiment then. Historically, the first weeks of the New Year set the tone for the first half of the year. There could be a sluggish start as buyers enter the “wait and see” phase. But the thing with housing is that it is a basic human need. Regardless of the cycle, people will always need a roof over their heads. People get married. Get divorced. Relocate. Have more children and need to upsize. Or children move out and need to downsize. So there will always be buyers looking to trade. It is just a matter of price.
Top 3 Tips for Buyers in 2016
1. Don’t focus too much on timing the market and playing the waiting game. We don’t expect the market will collapse and suddenly make a house which is $1 million become $800,000 overnight. If you are buying for the medium to long term, you should act when the time suits your family and your circumstances regardless of where the cycle is at
2. Be wary about falling into the trap of securing a bargain. You could potentially be buying a lemon if you focus too much on the price rather than on the fundamentals of a good property
3. Be realistic
Are you preparing to upsize or downsize your home? How has the property market impacted your choices? Let us know your thoughts in the comments section below.