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Sydney’s most expensive apartments 2011

Posted by Mark Mendel in Sydney Property News on 01 29th, 2012

Last week Domain wrote an article about the most expensive apartments in Sydney in 2011… Wow! Below is a list of the top 20 apartments sold.

Rank $m Address
1 $12.7 College St, city
2 $12.5 Liverpool St, city
3 $11.6 Buckhurst Ave, Point Piper
4 $10.8 Buckhurst Ave, Point Piper
5 $10 Buckhurst Ave, Point Piper
6 $10 Buckhurst Ave, Point Piper
7 $9.85 Phillip St, city
8 $9.7 Onslow Ave, Elizabeth Bay
9 $8.85 Rockwall Cr, Potts Point
10 $8.5 Sutherland Cr, Darling Point
11 $7.3 Bennett Ave, Darling Point
12 $7.25 Campbell Pde, Bondi Beach
13 $6.7 Milson Rd, Cremorne Point
14 $6.17 Macleay St, Potts Point
15 $5.52 Liverpool St, city
16 $5.5 Grantham St, Potts Point
17 $5.5 Grantham St, Potts Point
18 $5.07 Macquarie St, city
19 $5 Moruben Rd, Mosman
20 $5 Beresford Rd, Rose Bay

Besides this list there are probably a few more apartments that were on the market and didn’t sell and reportedly one apartment that has been sold off the plan in the Sydney CBD overlooking Hyde Park for $25million!

So after reading the article, what caught my eye more than anything was the acclaimed strata fees for the second most expensive apartment on the list being located in Stockland’s The Hyde. The cost of the unit was recorded at $12.5m but what is more amazing is the strata fees which are claimed to be $142,000 a year!!! Are you serious! This seems to be an absurd amount of money and can only wonder what this fee covers… What is important to know for investors though is that you want to look for developments with low strata fees. Anything up to about $3,000 per year is fine depending on the development and price you are paying for the apartment. Don’t let it deter you if it’s more, simply run the numbers and in some cases there may be good reason why your strata fees are higher and in return for high strata fees you may get facilities which tenants really want and are prepared to pay a higher rent to have! Also make sure you budget for strata fees to increase over time as they always do. Also remember as an investor, strata fees are an expense which you can claim and thus become tax deductible.

See the Domain article here.

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The Sydney public transport conundrum

Posted by Mark Mendel in Sydney Property News on 12 5th, 2011

The Sydney public transport system is a significant factor in determining property prices. On the one hand you have the ‘outliers’ – people who want to live in houses and who cannot afford the house prices of houses anywhere within 10 kilometers of the CBD. This creates demand in suburbs beyond the inner ring suburbs.  Many simply don’t want to be battling with the Sydney public transport system and may be eying inner suburbs for the future.

On the other hand you have people who want the convenience and the lifestyle associated with living in inner suburbs – Lower North Shore, Inner west, the City fringes and the Eastern Suburbs. Here supply and demand factors mean that apartments and semi-detached houses have risen strongly in value over the past five years.

The paradox is that the problem seems intractable.  No fewer than six different consulting firms have been engaged to look at ways of adding capacity to Sydney’s rail system. More recent advice by transport experts is that, over the next 25 years to allow more trains to run through the city – requirements that will cost in the region of $20 billion to $30 billion.

Newspapers have reported that senior bureaucrats have been told a multibillion-dollar overhaul of the system would be the cheapest and most efficient way to add capacity to CityRail during the next 25 years. One estimate shows costs of between $26 billion and $37 billion for adding capacity during the next 25 years. Without extra capacity through the CBD, trains will soon be so crowded in peak hours that services will need to be cut.

Two of the options raised involve using existing technology and double-deck carriages and building a second rail crossing over the harbor feeding a new station near Martin Place.

Another option, known as West Link, requires a second harbor crossing feeding a new station closer to Barangaroo. But three other options involve the ”three-tier” program of overhauling large parts of the CityRail grid, replacing it with ”metro-style” trains. These plans promise to run 28 trains an hour on existing lines through the city, compared to the maximum of 20 now.

A modified version of the three-tier strategy would cost $26.9 billion. The most expensive options would maintain double-deck trains across CityRail.

Whichever way one looks at these reports, it is clear that the same factors driving property prices today in Sydney as far as the split between those that want inner suburb convenience and lifestyle and these looking for affordable solutions, will still be driving prices in 5 years time.

Money spent on public transport won’t solve the problems but it will put money into the system.

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Sydney Property Market to Correct?

Posted by Mark Mendel in Sydney Property News on 10 31st, 2011

Despite much speculation that the Sydney property market is overpriced and ready for a fall, upward momentum continued into Q1 2010, although at a slower pace than expected. House prices rose by 1.4% in Q1 2010 while unit prices rose by 1.6%. However, over the twelve month period median prices have risen by 14% and 12% respectively. Remarkably and against the odds, this has taken prices above the peak reached in 2004.

ABS data suggests that house price growth has continued into Q2 at around 5%, with annual growth of just over 20% in Sydney. However, other providers of price data consider it has slowed further.

In real or inflation adjusted terms Sydney continues to sit below 2004 levels, suggesting no real growth for six years. This is similar to trends in the early 1990s where real prices didn’t reach previous peaks until seven to ten years later.

It’s the shortage factor.

A shortage of housing is set to drive rent upwards in the medium terms. Prices may follow, particularly in apartments in the middle and outer ring suburbs. For example apartment rents rose 2.2 percent in the September quarter, the highest rise in the nation. This coupled with flat property prices, rental yields are raising. Apartments, on average bring in 5.1 percent returns; houses 4.5 percent. Rents rising as expected, vacancy low but affordability an issue.

Vacancy rates tightened to 1.1%, down from 1.3% of the previous year. Rental growth of $10 per week in Q1 2011 was the first increase in rents for five quarters and amounted to an increase of 2.5%. With continued undersupply and a healthy level of population growth, rental growth should continue through 2011, particularly in the absence of any short term incentives to move into home ownership.

Dwelling approvals rise continues, but still around 10,000 short per annum. The dearth of new development has been well publicised Once again units were the driving factor, and continues the trend of the past ten years.

Over 80,000 people are likely to have moved to Sydney, generating a need of over 29,000 dwellings, before demolition and household change are taken into consideration. With no further rate hikes expected in 2011 pressure may continue on prices until rates fall in the first quarter of 2012 (if rate cuts do eventuate).

Affordability to decrease as rates and prices rise, and should limit price growth.

Not surprisingly affordability has been weakening as interest rates and prices (and thus loan size) increase. As at March 2011 some 34.5% of average household income was being used to service an average mortgage in NSW of just over $305,000. This is somewhere between the average 5 and 10 year proportions.

Population growth remains strong but as migrants slow, fewer leave interstate. Slowing international immigration appears to finally be eventuating, slowing to 39,000 people from almost 45,000 people in the previous two half years. However, as the gap between NSW median house prices and other States narrows, fewer people are leaving.

While the slowdown in international migrants is expected to continue as tighter immigration rules apply, the improving economy will continue to ensure that a high level of immigration is required. If the net loss interstate can remain low NSW population can continue to grow in excess of 100,000 per year.

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Where to for Sydney property?

Posted by Mark Mendel in Sydney Property News on 10 26th, 2011

Property market observers often refer to the Sydney housing market as amongst the most expensive housing market in Australia and one of the most expensive housing markets in the English-speaking world.

By way of example, the latest Demographic International Housing Affordability Survey showed Sydney’s housing market to be the second most expensive (behind Hong Kong) out of the 325 markets examined.

This is supported too by the September release of MacroBusiness Australian Housing Valuation Report which as shown in their chart below and based on a ration of Multiples (median dwelling prices divided by median household disposable income),  shows Sydney identified as the most expensive housing market based on this measure.

Median Multiples - August 2011

As any home buyer in Sydney will attest to, it is undeniable that the housing market is ‘‘expensive’’, but there is there is also compelling evidence that Sydney’s house prices are based on stronger foundations than the other Australian capitals and that Sydney offers better value from an investment perspective.

Economics 101

Even if you have not studied Economics 101 you will appreciate that supply and demand is the primary and fundamental driver of prices for any commodity. Housing is no different. Indeed housing is THE exemplar for supply and demand at work.

One of the key drivers of Sydney prices over the past few decades has been the consistent supply and demand imbalances. When compared to other states the Sydney supply demand equation has almost always been in favour of upward bias in price pressure (allowing for pauses such as we are now seeing).

Indeed there is a fallacy about supply and demand and many people believe we have a national housing shortage and it is an accepted view that there is a significant shortage of stock. The fallacy has been generated by the tendency to add past shortages to the current year’s figures and the constant press about reducing development activity.

Here it is immigration and state migration that is a prime factor and data released by the Australian Bureau of Statistics reveals that Sydney is under-supplied and Melbourne over supplied (when planned buildings are taken into account). In fact, New South Wale’s (read Sydney’s) annual dwelling completions recently plumbed 30-year lows while the other states (particularly Victoria) experienced a mini construction boom.

Although Sydney’s dwelling construction rate – defined as the number of dwelling completions per 1,000 head of population – has for 30 years lagged the national average, it has slumped over the past decade. Sydney is now constructing homes at around half the rate of the other states.

The resources boom is also having an impact on state by stage markets and here it is noted that BHP Billiton recently predicted that over the next five years the mining industry would generate around 170,000 new jobs. Again, taking a leaf out of Economics 101, each new job created has a multiplier effect; it becomes clear why we should optimistically embrace our future.

Dwelling Completions

Sydney was unaffordable for most of the last decade and this market, on average, achieved a growth rate of 5.7 per cent p.a. Its last decade growth rate is an indicator of things to come in other similarly now unaffordable capital city markets. This outcome is not to say that Sydney’s house prices cannot/will not fall; rather that it is less susceptible to a downturn than some of the other capitals, such as Melbourne. Sydney’s price premium has eroded as the chart below shows.

Sydney’s real (inflation-adjusted) house price performance relative to the national capital city average since 2007.

Real House PricesAssuming Sydney’s housing values in relation to the other capital cities are likely to revert to some mean level, the current low valuation gap suggests that Sydney’s housing market is likely to outperform the capital city average.

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Sydney Rents Rise 13%

Posted by Mark Mendel in Sydney Property News on 10 17th, 2011

Sydney rents have risen by as much as 13 per cent in the last year, with the biggest hike at Edgecliff in the eastern suburbs.

Tenants are now paying about $60 more a week than they were a year ago, latest figures from Run Property show.

The Sydney suburbs of Edgecliff, Randwick, Ryde, Newtown, Surry Hills and Neutral Bay all recorded rent increases of more than 10 per cent for new tenancies in the past year, the report released today said.
Edgecliff topped the list with a 13.1 per cent rent hike.

In Melbourne, Thornbury, Oakleigh, Fairfield, Carlton North, South Yarra, Kew and East Melbourne recorded rents rise by at least 9 per cent.

Thornbury had the highest increase of 12.2 per cent.

By contrast, Brisbane rents rose by an average of just 3.4 per cent, or $11 a week.

Run Property CEO Rob Farmer said the jump in rents showed there was still value in investment properties.

“The smart money is starting to flow back into investment property, especially now that the sales market is off the boil and there are buying opportunities out there,” Mr Farmer said in a statement.

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NSW State Government – Jobs Focus

Posted by Mark Mendel in Sydney Property News on 09 30th, 2011

BARRY O’FARRELL will promise to create half a million jobs over the next decade, using his government’s landmark first budget to launch a plan to reignite the NSW economy.

Spending cuts in Tuesday’s budget will fund programs to double tourism, increase mining projects and attract foreign business investors.

The Premier will also set out plans to kick-start the housing market through increased land release in Sydney – an extra 10,000 blocks a year – and give a written pledge to maintain the state’s AAA credit rating.

The government’s targets, which it describes as ”deliberately ambitious”, are contained in a new state plan, NSW 2021, leaked to The Sun-Herald. The 63-page plan is being referred to by Coalition staff as ”the bible”.

Insiders said every Coalition budget in coming years would be framed around meeting the targets in the plan and Mr O’Farrell would urge voters to judge his government on clearing the hurdles it sets out.

A cabinet committee, headed by the Premier and his deputy, Andrew Stoner, will be set up to grill ministers and department heads on their targets.

”The 32 priorities in the plan should be on every minister’s pinboard and a copy of the plan in every briefcase. This is what we will be judged on in 2015,” a source said.

The Premier, who has been criticised for launching dozens of audits and investigations since taking office in March, will face some scepticism from an electorate tired of NSW Labor’s ”plans for a plan” style during its years in office.

The Coalition’s plan, which was compiled by one of the Premier’s closest confidants, Peta Seaton, a former Liberal MP, will be subject to an annual progress report scrutinised by the NSW Auditor-General, the Bureau of Statistics and the Chief Scientist.

The plan sets a jobs growth target of 1.25 per cent a year. Based on Treasury figures, that would add 475,000 jobs by 2020 – or about 50,000 jobs a year.

The CommSec chief economist, Craig James, said the government faced an ageing workforce and an uncertain global economy, but with long-term jobs growth averaging 60,000 a year, its target was ”reasonable”.

Mr James welcomed the focus on kick-starting the housing market. The state plan calls for 25,000 new dwellings a year, up from about 16,000. The Housing Industry Association last week warned that NSW would have a shortfall of 155,700 dwellings by 2020.

”The NSW economy … needs a kick-start and housing provides a much-needed multiplier effect. In Victoria they have built more homes, which has attracted more people and created more work for anyone from trades people to someone making curtains,” Mr James said.

The AMP chief economist, Shane Oliver, said increasing business investment by 4 per cent would be a ”challenge”, with current growth close to 3 per cent. Mr Stoner’s department of Trade and Investment will ”target and attract potential international investors into priority sectors, especially where we have overseas NSW trade and investment, tourism or education offices”, the plan states.

If the government meets its target, real business investment will climb from $50 billion a year to $77 billion by 2020.

Mr Stoner will meet the President of the European Commission, Jose Manuel Barroso, in Sydney today to discuss deepening trade ties.

A controversial element of the plan is expected to be its focus on expanding exploration for petroleum and minerals. Under the New Frontiers Program, the government will seek greater investment from mining companies to dig into ”under-explored areas of NSW”.

Tourist expenditure would double over the period, with regional tourism organisations granted $5 million in special funding to promote their areas.

Promises set in stone:

  • 475,000 new jobs over 10 years
  • $27 billion rise in business investment over 10 years (4% a year)
  • $10 billion lift in gross state product (1.5% a year)
  • Double tourism expenditure in 10 years
  • 25,000 new houses built every year
  • 50,000 housing lots to be kept available
  • 10% cut in crimes against people and 15% fall in property crimes by 2015-16
  • 21% cut in childhood obesity by 2015
  • 3% cut in smoking rates by 2015

Source: SMH 4/09/11

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Sydney’s 2-speed property market

Posted by Mark Mendel in Sydney Property News on 09 19th, 2011

We’ve read about the 2-speed economy: that’s where anything to do with resources and Western Australia (and parts of Queensland) is booming while the rest – especially retail and manufacturing – is comatose. Sydney feels like a 2-speed economy at this time as far as property is concerned. One Eastern Suburbs agent said he has more listing over $2million than he has ever had but fewer buyers than ever. In one deal he claimed that a vendor was forced to discount their price from $2.4 million for a house in beachside Bronte to $1.9 million – a discount of over 20 percent. The house had been on the market for 70 days and the vendors had to settle on a downsized house elsewhere.

Data released showed that days on market for an Eastern Suburbs house has, on average, increased from 45 to 55 days compared to 12 months ago while the discount offered (asking price to realised price) had nearly doubled from (average) 4 percent to over 7 per cent.

That however is not the full picture. The 2-speed aspect is that at the sub-$600,000 sector of Eastern suburbs of Sydney, property clearance rates are increasing. Most of these properties are apartments, with inner West also showing signs of clearance activity in houses and semi detached houses around the $660-$700,000 mark.

Agents are reporting that this is a function of affordability but also a more reality price setting from vendors.  Earlier this year auctions were competitive with more than 70 percent falling under the hammer; these days many properties are being put up for sale with auctions failing to attract competitive bidding.  Perhaps agents too are being realistic – setting their appraised values downwards to enable a sale.

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NSW First Home Buyer Stamp Duty Changes

Posted by Mark Mendel in Sydney Property News on 09 8th, 2011

New changes have been made to the stamp duty concessions once again. This time around it has affected First Home Buyers looking to buy established property. From the 1st January 2012, First Home Buyers will not be eligible for any discount on their stamp duty if they are to purchase an established home. If they are looking to purchase a new home or off the plan property, then the stamp duty concessions will still apply.

Many argue that it is very difficult for first home buyers to get into the market and disagree with the government’s move to abolish the concession on old homes but this has been done to help stimulate the economy and requirement for new homes to be supplied to a market that is in desperate need for them.

From January 1 next year, newcomers to the property market will no longer be able to avoid having to pay transfer title charges on existing homes under $600,000. This will affect about 80 per cent of first-home buyers or 42,000 of the 50,000 first home buyers each year on average.

“This reform will make housing more affordable for first-home buyers by boosting the new housing supply,” said Aaron Gadiel from the Urban Taskforce, a large developers’ lobby

The Property Council of Australia said tying stamp duty concessions to new housing supply was “a smart choice”.

“Housing supply remains limp across NSW and gearing incentives to motivate the construction of new stock makes sense,” executive director Glenn Byres said.

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Sydney Home Buyer and Property Investment Show 2011

Posted by Mark Mendel in Sydney Property News on 08 12th, 2011

We recently attended the Sydney Home Buyer and Property Investor Show and were really surprised by the turnout. After a number of months of uncertainty about interest rates, poor share market performance, America’s massive issues regarding their trillions of dollars of debt and Europe’s continuing woes, the turnout was much larger than expected.

There were all types of people at the show from those looking for more information through their research phase to others that were ready to buy on the day. The 3 days certainly reconfirmed what we all already know, that Australia has a wonderful love affair with property.

Through our discussions with home owners, first home buyers and property investor, one message became clear and that was many were happy to give away the dream of owning a home to rent in their preferred location and buy a number of investment properties to still remain in the property market and enjoy the rental returns and capital growth that property investment has to offer along with the fantastic tax benefits.

What was amazing was that the Sunday night after the show finished, 60 Minutes on Channel 9 ran a storey about this exact situation, which you can view here.

I had previously written about this on our Investment Property Blog, which you can view here.

Through our talks we also found out that many visitors to the show had paid for their tickets. A little unfortunate when we had heaps of free tickets to give away. It’s all about knowing the right people. So next time you want to go to the Sydney Home Buyer and Investment Property show, please ask one of the investment property experts at Find Investment Property for a free ticket and they’ll be happy to give you one!

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Sydney International Convention and Entertainment Centre Revamp

Posted by Mark Mendel in Sydney Property News on 07 8th, 2011

Plans have been lodged for a $900 million convention and entertainment centre at Darling Harbour. The state government unveiled the plans and is preparing to host a forum about the project with business leaders.

The Sydney International Convention and Entertainment Centre was a pre-election promise of the Coalition. It will be built on the site of the Entertainment Centre car park, after which the Entertainment Centre will be demolished.

The concept plan includes seating for up to 12,000 people, and a ”multi-function exhibit hall” of up to 12,000 square metres. It is envisaged the centre will host activities from banquets and conventions to rock concerts and sporting events such as basketball, tennis and boxing.

The Planning Minister, Brad Hazzard, and the Minister for Tourism and Major Events, George Souris, are expected to host a forum today to seek feedback on the concept plans for the centre.

Expressions of interest will be called in September. It is hoped construction will begin in September 2012 and the project completed in 2015. Mr Hazzard said it was ”about making Sydney centre stage for international events, invigorating tourism and giving the people of NSW an unrivalled world-class venue”.

This is an exciting step for Sydney which has lost a lot of business to Melbourne and other international locations when it comes to hosting major functions. The Entertainment Centre as it currently stands is old and in need of a major revamp.

Source: SMH

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