Image: This apartment at 93 Elizabeth Bay Road, Elizabeth Bay, sold for $5.8 million in July 2016, having been purchased for $3.51 million in July 2015. Source: afr.com
Sydney and Melbourne house prices are on track for a fourth year of double digit growth as the strength of demand, and the shortage of supply, continues to confound property experts who predicted the boom would slow in 2016.
When the Reserve Bank board meets on Tuesday to decide whether to cut the 1.75 per cent cash rate even lower, and kick housing along again, the board members will have evidence of another strong month of house price growth, with dwelling values, according to CoreLogic, up about 1 per cent during July.
The growth is weaker than in May, when the interest rate cut, and a tweak to the statistics, produced a 3 per cent surge in Sydney, but it is enough to take year-to-date house value growth to 9.9 per cent in Sydney and 7.0 per cent in Melbourne.
Last month the Reserve Bank noted that house prices in Sydney were “rising moderately,” after “unusually large increases” in April and May, and declining in other capitals. At the same time, housing credit growth, 6.7 per cent in the past year, eased as investor credit growth halved.
The Reserve Bank has been right about the other capitals. In July, the CoreLogic dwelling values weakened in both Brisbane/Gold Coast and Perth. In the year to date, Perth dwelling values have lost 5.5 per cent.
The RBA also pointed to the measures that would slow growth, like the tightening in lending standards, the increased restrictions on foreign buyers, the low growth in rents and the coming surge in apartment supply.
Apartment sales are slowing, but in the traditional core suburbs of Sydney and Melbourne, the sales defy the negatives.
Emma Van Haandel made a $2 million gain on her Elizabeth Bay apartment in only one year. Last week Ms Van Haandel, the owner of boutique PR agency EVH, and her husband Joel Williams sold for $5.8 million the three-bedroom unit for which they had paid $3.51 million just 12 months ago.
Granted, they had renovated the 228-square-metre apartment in the Kincoppal block of the prestigious Sydney suburb.
McGrath Real Estate agent, Richard Shaloub, has just sold an apartment in Sydney’s near city Walsh Bay for $2.2 million, up $400,000 since it last changed hands 12 months ago.
“This is the strongest market that I have seen in the 14 years I’ve worked in this [city] location,” he said. “Buyer strength and aggression is at its highest and the supply of property is at a low point.”
It is the supply that is confounding the experts. In Sydney the number of listings, at 20,000, is about half the pre-boom level of 2012, and turnover in the city in the year to July is 19 per cent less than in same period in 2015.
Listings in prestige suburbs in the two largest cities is down one-third on last year – are holding prices higher and some in the industry warn that the low stock levels show signs of persisting into spring could keep price growth elevated.
“The lack of stock is one of the key drivers of what’s panning out here,” said Sydney buyer’s agent Rich Harvey. “The other thing is what I call the Mexican standoff – a derivative of low stock is that vendors are worried they will not a have a place to go to. They say ‘I don’t know where I’ll go when I sell’, and that’s deterring some people from trading down, sideways, or up.”
It’s not just a Sydney problem. “I’ve got a couple of clients who’ve sold and are fretting because they can’t get back in to the market,” said Melbourne buyer’s agent David Morrell. “It’s the lack of choice.”
This weekend will see a pick up, but numbers are still well down on last year. The 1489 auctions scheduled across the country this week are higher than last week’s 1,329, but they remain a fifth below the 1,903 held in the same week last year.
“Overall, this year’s winter auction market has been much quieter than what was seen last year, with a total of 12,469 auctions held over the first eight weeks of winter this year, compared to 15,142 at the same time last year – almost 20 per cent lower,” data provider CoreLogic RP Data says.
CoreLogic research director, Tim Lawless, remains confident that the boom is winding down. “I still think we will see the rate of growth slowing down because of affordability constraints,” he said.