Since the pandemic, I’ve seldom been spotted at an auction. You see, my role transformed into one that supports and leads our teams across multiple locations on the Lower North Shore. But, the market dynamics have changed this year and, despite my best efforts to avoid getting involved in day-to-day sales campaigns, this bustling real estate market demands all hands on deck. So, I’ve been wrapped up in quite a few auctions, negotiations, and marketing campaigns of late. I don’t plan to make a habit of it… but here’s what I’m seeing on the ground.
As many people struggle to meet their mortgage payments or strive to break into the property market in the first place, one cannot help but marvel at the staggering cash influx of $130 billion last year alone, thanks to thirty percent of Australians who bought their homes with cash.
While thirty percent is pretty typical in established markets like the Lower North Shore, a simple stroll around Mosman will reveal homes changing hands for an average of $2.9 million. This underscores a reality that those who bought without a mortgage are also selling without one; indicating a notable presence of empty nesters and resizers who are now lining their pockets with cash.
A resurgence of international investors has also been keeping us on our toes. Last quarter, I wrote about China’s return to the real estate scene, noting that the market share of foreign buyers has reached its highest level in five-and-a-half years. The recent visit of the Chinese foreign minister to Australia, coupled with the announcement of tariff reductions on Australian products including wines, suggests a potential mending of relations between the two countries. This positive development could be stimulating heightened engagement in certain high-end markets.
The other factor driving the market at the moment is a surge in stock levels for the first time in a long time, with total property listings marginally higher than in the same month last year. Fortunately, this hasn’t dampened demand in the slightest. With interest rates on hold, investors can see the golden window of opportunity in front of them and are jumping on board while they can.
Despite the increase in overall stock levels, however, an increasingly tight rental supply is plunging Sydney’s rental market into a pressure cooker environment. This is due to record-low vacancy rates, which are at a mere 1.7 percent, combined with escalating rent prices, surging demand and a rapidly rising population.
From an investor’s perspective, surging mortgage payments mean frequent rent reviews, leaving tenants feeling the heat with limited escape routes. In pricey neighbourhoods like Milsons Point and Kirribilli, many investors are singing the negative cash flow blues. While these landlords are certainly rejoicing in higher rents, those banking on negative gearing are now coughing up more dough than ever.
Despite these concerns, there is a high level of confidence in the market that I believe is due to speculation regarding potential rate cuts later in the year, which would give buyers more borrowing capacity and sellers swifter sales.
Nerida Conisbee, Ray White’s resident economist and savvy forecaster, thinks that inflation dynamics and the timing of economic data releases will have a big role to play in the timing of a potential rate cut announcement. I tend to agree; the unemployment rate is back to a record low of 3.7 per cent and inflation is continuing to trend down. If everyone’s got jobs and inflation is under control, a rate cut seems likely. Nerida predicts that this could happen as early as the end of May. If her predictions materialise while there are still significant stock levels, this will add fuel to the fire, and I might be back on the tools for a little longer than I anticipated.
Now, one might assume that homes holding a $3 million price tag would not be of interest to most first home buyers, but one would be wrong (sort of). While about one-third of buyers are transacting in cash, and another third are riding the mortgage wave, the rest are tapping into the “bank of mum and dad” for a helping hand.
In fact, the number is a lot higher than you might suppose. Since 2017, there has been up to 60 percent more first home buyers receiving financial assistance from parents or other family members. This marks a substantial rise from approximately 12 percent in 2010.
So, why does this matter? Well, psychologist and writer Peter Quarry says that the downside of borrowing from the bank of mum and dad is increasingly showing up in psychotherapy and counselling rooms. While we’ve all been told not to “bite the hand that feeds you,” if you’re relying on mum and dad to put a roof over your head, the inequality, power and conflict that may arise can certainly strain family dynamics and cause some pretty severe emotional complexities.
Peter warns of potential pitfalls, noting that dependency on familial aid can strain relationships and perpetuate unhealthy power dynamics. Issues arise from unclear agreements, exacerbating existing family tensions.
Love it or hate it, my opinion is that with stagnant wage growth and rising costs of living, the “bank of mum and dad” has emerged as a viable route to homeownership for many. While it can be a valuable resource, especially for those looking to buy within five kilometres of the city where housing costs are steep, it can also be a double-edged sword. Peter’s discussion shows that it is crucial to recognise the potential drawbacks and engage in transparent discussions about its implications.
Evidently, it seems that in real estate, strong relationships can be vital for successful transactions. This got me thinking; as I’ve transitioned to a Director’s role in recent years, what do my relationships look like now? The truth is, some of my key relationships are with the incredible team I have alongside me, and it would be a disservice not to shine a spotlight on them.
Transitioning from the daily sales grind to a role where I can guide and support these fantastic professionals has been incredibly rewarding. From a business standpoint, seeing the development and progress of our team members fills me with pride, knowing that we are nurturing talent and fostering growth within our industry. It’s a privilege to play a part in shaping the future of real estate by investing in the success of these remarkable individuals.
First and foremost, in light of World Down Syndrome Day recently I’d like to acknowledge the man, the myth, the legend, William Scambler from our Mosman office. Starting as a ‘work-experience kid’ and evolving into a real estate specialist, Will has become an integral part of our Urban Living team over the past three years. If you’ve ever attended one of our open inspections, you’ve likely experienced William’s warm and genuine smile, which instantly makes you feel like a true friend. His contagious positivity is undeniable, and I’ve been incredibly fortunate to witness his growth over the last few years. What fills me with the most pride, however, is watching the way my team has embraced and cared for Will – it’s something truly special that has touched me deeply and reminded me of the generosity and kind hearts I’m surrounded by.
Jake Wilson, one of our Senior Sales Advisors has also gone from strength to strength. A dedicated agent, Jake is a leader of Urban Living, and has a real knack for establishing and maintaining relationships with his clients. Not only is he a top salesman, securing three Premier Performer awards in the four years he’s been working in sales, he’s just welcomed his second child into the world, marking another milestone in his successful journey – congratulations Jake!
Over in our Projects and Developments division is Nicole Phelen, who boasts sixty years of experience – and she’s only forty! Nicole is instrumental in bringing new projects to life, collaborating closely with architects, interior designers, and developers to ensure the seamless launch of prestige residential buildings. Her keen insights into all projects marketed by Ray White Lower North Shore Group make her invaluable, especially as the team’s Variation Specialist, addressing bespoke finish requests from buyers for off-the-plan opportunities. However, it’s with mixed emotions that I share Nicole’s exciting news—her impending departure due to her first pregnancy. While we’ll miss her dearly, we’re thrilled about her new journey into motherhood and wish her all the best. Congratulations, Nicole!
Lenny embodies the quintessential Kiwi character, approaching his work with a competitive spirit and a level of dedication that would be difficult to match. After years in landscape construction, he made the leap to real estate, bringing his unique background and can-do attitude to the Ray White Lower North Shore Group crew. His recent move into sales, alongside the joy of becoming a dad, is something we’re all incredibly proud of. Keep up the good work, Lenny!
Our recent function for buyers, developers, and the community, hosted at the display suite of the superb new apartment complex Willoughby Grounds, shed light on the current state of the Australian property market with Ray White’s Chief Economist Nerida Consibee. In short, she reported that Australian house prices appreciated by 10.4 per cent in the past year, Sydney apartments experienced growth of 6.4 per cent, and record rental increases further underscored the robustness of the market.
More positive news suggests we are at the top of an interest rate rising cycle, with Interbank Cash Rate Futures predicting rate cuts in September 2024 and early 2025. Undersupply of available homes – even with the uptick in listings on market – is buoying prices. Last year alone, the demand for houses surpassed 250,000 yet only 175,000 were delivered. Luxury new apartments, in particular, have seen sustained demand.
The innovative iCIRT rating system, designed to instil confidence in consumers regarding building professionals, was previewed to our audience by Brad Walters from Equifax. This system evaluates builders based on rigorous criteria including capability, conduct, character, capacity, capital, and counterparties.
Brad spoke highly of Dasco, the builder of Willoughby Grounds, which has achieved an impressive 4.5-star rating, the highest possible for a privately-owned construction company. Purchasers at the event were reassured by Dasco’s track record of delivering quality buildings, coupled with its strong financial position and commitment to safety practices. This endorsement underscores the confidence in the project and provides valuable assurance to prospective buyers.
The landscape of the rental market is evolving rapidly, with a noticeable surge in short-term, fully-furnished homes becoming available. This trend has been fuelled by clients embarking on overseas travels for brief periods, seeking tenants to occupy their properties in their absence. These historically challenging-to-rent properties are now attracting suitable tenants, often those exploring new neighbourhoods or in transition between homes.
While rents are climbing in select areas, particularly in the $600-800 range, the demand is high yet accompanied by discerning expectations from prospective tenants. Despite a shortage of available properties, we’re witnessing fewer applications as tenants hold out for properties that meet their expectations. Open houses are seeing minimal foot traffic, with typically only 1-2 individuals attending.
Interestingly, many tenants are opting to stay put, evidenced by a low vacancy rate of 1.4 per cent at the close of Q3. Although landlords were previously able to implement rent increases with minimal resistance, there’s now a noticeable pushback from tenants who are seeking greater value. A key aspect of attracting tenants is ensuring that properties are well-maintained, with expectations for refreshed paint and renovated conditions.
What’s more, is that the rental market is seeing a notable trend of properties transitioning to the sales market, intensifying competition for available rentals. Consequently, tenants are prompted to expedite their moving decisions, making current tenants the primary target audience for new rental listings.
In property management, there has been a notable uptick in repair requests from tenants. However, as clients understandably prioritise cost-saving measures, this has necessitated regular negotiations for competitive pricing with tradespeople. Additionally, managing arrears has become a primary focus to ensure timely rental payments, which are paramount to relieve financial pressures on both tenants and landlords.
The current commercial property market is experiencing notable shifts compared to the previous year. There’s been a substantial increase in the number of properties for sale, particularly with a focus on development opportunities. It appears that economic recovery and growth prospects could be encouraging property owners and developers to capitalise on rising demand for commercial spaces, leading to a surge in listings.
Given the current hold on interest rates, commercial investment property yields have seen an upward adjustment ranging from 0.5 per cent to 1 per cent. However, the leasing market has experienced a decrease in available opportunities compared to the same period last year. Despite the increase in supply, the demand for commercial properties has remained robust, as evidenced by a series of notable transactions completed recently.
Two significant lease deals include 890 Military Road, Mosman, one of the busiest retail locations in the suburb, which was recently leased to multinational fast food restaurant chain Guzman y Gomez, and 1/2 Awaba Street, Mosman, a corner positioned, beachfront landmark that signed over to a new food and beverage operator. Additionally, a robust Expression of Interest sale concluded with the largest transaction on record in Mosman, involving 696, 700, and 706 Military Road.
These examples underscore the enduring appeal of the commercial property sector, with strong interest from both investors and purchasers driving notable transactions and record-breaking sales in sought-after locations like Mosman.
As interest rates stabilise, a familiar rhythm has returned to the real estate market and we are now observing a period of cautious optimism.
The banks have maintained a keen appetite for lending, although the landscape of borrowing preferences has evolved. Fixed-rate mortgages appear to be losing their allure, while variable rates, offering more flexibility and value amidst a climate of economic uncertainty, are back in vogue.
Interestingly, parents of high schoolers are beginning to contemplate property investment not just for their benefit, but also for securing their children’s financial future and leveraging tax benefits. This strategic approach reflects a growing trend towards long-term financial planning and generational wealth management.
In another interesting turn, where we once saw coastal holiday homes attracting investors as a result of the pandemic, we are now seeing those investors turn towards more deliberate and lucrative investments. As the economy changes, so do lifestyles, making the current climate suitable for strategic, lucrative and long-term investment decisions.
In light of all this, Loan Market Lower North Shore (LMLNS) has expanded its team, actively seeking to enhance its relevance in the local area. By increasing its presence at open inspections (OFIs) and fostering stronger client relationships, we want to demonstrate ourselves as a trusted and knowledgeable resource in the ever-evolving property landscape.
As we settle into the rhythm of 2024, the real estate market appears to be characterised by overall stability, with supply increasing across various price ranges while still being met by demand from prospective buyers.
However, sellers need to pay close attention to pricing strategies, as buyers are increasingly focused on obtaining fair value before committing to a purchase. One notable trend is the hesitation among buyers due to a lack of clarity on pricing expectations. This uncertainty negatively affects buyer engagement, highlighting the importance of transparent communication between sellers and buyers through their agents.
This year’s interesting one is the diminishing effectiveness of ‘off-market’ selling strategies in the current market environment. Properties in the price range of $2 million to $30 million, which languished off-market in 2023, have shown stronger performance in the March quarter after being formally listed on the market. This suggests that buyers are more responsive to properties that are actively marketed and publicly available.
Despite these nuances, clearance rates across all categories of properties remain relatively stable, hovering around 60 per cent. This indicates a balanced market where supply and demand are in equilibrium, but market participants need to remain vigilant and adaptable to changing dynamics.
The Cammeray market experienced a surge in listings early in the year, followed by a gradual tapering, resulting in a relatively consistent period across the house and apartment segments. Buyer confidence has held up surprisingly well, evident in the growing demand for well-renovated homes featuring thoughtful design elements. These are commanding premium prices, appealing to buyers seeking the allure of move-in-ready residences that come without the hassle of extensive renovations.
Looking ahead to May, we anticipate an uptick in available stock, setting the stage for heightened activity leading into the winter months.
On a personal note, I am thrilled to share that I will be swapping my running shoes for dancing shoes and look forward to Fox trotting, Waltzing or Tangoing my way to finding a cure… in the upcoming ‘Stars of the North’ annual fundraiser for Cancer Council. Last year I was involved as an auctioneer and sponsor, this year I have been swept into the arena as one of the dancers. As well as many others in the community, I have been directly affected by family and close friends who have battled Cancer, some have won and some have lost. If you would like to support me, I would appreciate it.
Our business has achieved exceptional success in the first quarter, marked by robust sales and impressive leasing performance. This accomplishment underscores the enduring allure of properties along Sydney’s foreshore, where we have witnessed a significant surge in buyer interest and transactions. The irresistible appeal of waterfront living continues to captivate buyers in search of luxurious and prestigious residences in one of Sydney’s most coveted locales.
The imminent opening of the Crows Nest and North Sydney (Victoria Cross) Metro Stations has further amplified buyer interest in properties within close proximity to these stations. This enhanced accessibility has emerged as a pivotal factor shaping buyer and tenant decisions, as the convenience of reliable public transportation increasingly influences property preferences. The advent of these new metro stations has not only spurred demand but has also strategically positioned our business to capitalise on the growing trend of urban living and connectivity.
Looking ahead, our business anticipates a promising outlook for the real estate market in the Lower North Shore. With our strong first-quarter results and the projected influx of buyers drawn to properties near the new metro stations, we are primed to meet ongoing demand and seize opportunities within Sydney’s dynamic real estate landscape. By leveraging our expertise and strategic positioning, we are committed to sustaining our momentum and achieving continued success in the upcoming quarters.
I’ve already noticed several key trends emerging in the 2024 calendar year. In Willoughby, homes priced between the low $2 million and early $3 million range are performing exceptionally well, particularly semi-detached properties offering an affordable entry point.
However, there’s a worrisome pattern emerging: a noticeable decline in the availability of renovated homes hitting the market this quarter. While homeowners may hesitate to invest in renovations due to economic uncertainties, buyers seem exceptionally deterred by properties in need of upgrades.
Furthermore, some buyers are adopting a cautious approach, opting to delay their purchase decisions. This reflects the current market dynamics, where real estate investments are approached with greater deliberation. Nevertheless, there’s still a substantial pool of eager buyers actively seeking their dream home, making it an opportune moment to showcase your renovated property.
If you would like any advice on the market, please get in touch with our team. We’re here to help.
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