Discover the rise in super-prime residences, changes in home spaces, and how interest rates impact property dynamics. Get quick snapshots of specific suburbs, notable price changes, and the ongoing story of Lower North Shore real estate.
This time two years ago, in the midst of a peculiar pandemic, I wrote about the seemingly nonsensical waitlist for Porsches in what was meant to be a dark and gloomy time for the economy. This year, if you’re settling into the confines of your new Porsche, you might happen to glance through the rearview mirror, recalling the odd phases of the economy that we have all experienced in quick succession.
By the time your coveted car arrived after 12-months of waiting, the economy had rebalanced and the new extravagant expense was revenge travel from which we have now morphed, in my opinion, to more deliberate investments. Today, the spending spotlight is cast on the principal residence. It’s out with the Porsche (not literally, of course, keep your car), and in with what some call the ‘super-prime residence’ asset – a reflection of changing times and evolving priorities.
Home Office, Gym and Movie Theatre: Because commutes are so last season
In the era post Zoom graduations and virtual wine tastings, our homes transformed into the ultimate multi-functional spaces. Once a secret club of 3 per cent pre-COVID, the home office society now includes a whopping 65-70 per cent of the population. The secret’s out, and so are the dress codes.
The concept of a mandatory “commute” is outdated. This means we’re not just acquiring residences to rest our heads at night; we are investing in multipurpose spaces that must have home offices, private gyms, and personal movie theatres.
Super-prime home sales (those selling for more than $15m) sporting luxurious amenities, continue to perform well in Sydney’s real estate market, with 71 super-prime home sales recorded between July and September. Our local market distinctly reflects this trend.
A decade ago, the North Shore held a modest 13 percent share of super-prime home sales—a fraction that has now swelled impressively to 31 percent in 2023. Why? Australia’s economy is forecasted to face a challenging year in 2024. The government predicts slowing economic growth, rising unemployment, continuing budget deficits, and history suggests that in times of uncertainty, Australians tend to seek security in tangible assets like real estate.
Sydney real estate market’s impressive 11.6 percent surge in the last 10 months also signals a shift from “revenge travel” to Australians craving the luxury of a Greek Island villa within the comfort of their own home.
This could be why we saw a flurry of activity rather early in Spring – with the surge in springtime sales starting in August rather than the historic uptick that comes in mid-September. Even as the surge began to taper off by October and November, the market continued to grow across all areas. Rental properties, too, experienced a surge, with one-bedroom units fetching $700 a week.
Interest rate limbo: Who’s winning?
With so much activity happening in the market, you’re probably wondering, ‘Have The Reserve Bank’s attempts to rain on the luxury property parade been effective?’
Well, *cue the collective chuckle of baby boomers*, despite the cash rate hitting an unsavoury 4.35 per cent in December, the highest since the dawn of the smartphone era in 2011 and enduring a year-and-a-bit of consecutive interest rate hikes, those savvy sixty-somethings are unfazed.
Armed with cash savings, superannuation, and low-interest loans from the equity in their homes, they’re not just driving into, they’re practically cruising in the super-prime home market. It’s like the Reserve Bank’s been playing a game of limbo with interest rates, and the boomers are showing us all how low they can go.
But wait, there’s another winner. China’s return to Australia’s real estate scene, spurred by record migration and the nation’s post-pandemic reopening, was also driving activity of super-prime home sales in 2023.
The surge in foreign investment is undeniable, marked by a 400 per cent spike in enquiries reported by international agents.
Treasury data substantiates this trend with a 40 per cent increase in government approvals for Sydney, Melbourne, and Brisbane markets, with a focus on China, Hong Kong, Taiwan, and Vietnam NAB’s recent residential property survey also paints a vivid picture, revealing a consistent increase in the market share held by foreign buyers – now at a 5½-year high.
Chinese buyers, in particular, are setting their sights on more upscale properties, with enquiries through Juwai IQI indicating a preference for homes boasting median prices over 25 per cent higher than those in 2019.
Stabilising Interest Rates: Because Rollercoasters Belong in Theme Parks, Not Mortgage Plans
With the capital city median now giving us a friendly nod at nearly $1 million, significantly above last year’s peak, a much needed stabilisation of interest rates is on the horizon.
A notable drop in the inflation rate from 7 per cent back to 4.9 per cent signals interest rates may be either at their peak or very close to it.
While another rate rise is likely in 2024, it looks as though they will come back to pre-COVID levels before the end of the year. No more heart palpitations with each rate fluctuation – just a stable, reliable rhythm that lets you trade, upgrade, and renovate without fearing an interest rate plot twist.
While those buyers who had access to quick cash have already made their move in the market, 2024 might, therefore, reveal itself to be a good time for conditional buyers – those still awaiting bank approvals or navigating the sale of their current homes – to jump in.
In 2023 their momentum was likely tempered by concerns about interest rate uncertainty. Still, with a little more stability returning to the market, the pool of eligible buyers is likely to swell.
A window of opportunity (on the 22nd floor)
Affordability challenges constricting conditional buyers seem to be redirecting buyer interest toward units and apartments. Nerida Conisbee, Ray White Group’s resident property economics savant, spilled the tea and expects the super-prime property status to extend to apartments in 2024.
Last year’s scarcity of new apartments, coupled with a growing population’s desire for inner urban living, sets the stage for a luxury apartment boom. People are quite literally trading space for place. For prospective homebuyers and investors, the current climate presents a unique window of opportunity.
Over three decades, Sydney’s property values have displayed a robust upward trend, growing a remarkable 449 per cent. More importantly, the Lower North Shore, exemplified by Mosman’s 2 per cent growth in the past year and a remarkable 14.9 per cent increase over three years, remains a secure investment haven. The uptick in sales and property listings underlines its flourishing market, drawing interest from both sellers and buyers alike.
Such consistent growth is indicative of the area’s resilience to market fluctuations and is therefore well-poised for investors wanting to take advantage of the growing luxury apartment market.
While the price tag is heftier, the truth remains that if you’re investing in bricks and mortar, there’s no safer bet than the Eastern Suburbs, Lower North Shore, and Upper North Shore markets. And, as the broader Sydney market picks up again, there’s a wide window of opportunity for anyone astute enough to adopt a long-term perspective.
Off-the-plan sales of quality apartments in convenient locations continue to thrive, particularly across the Lower North Shore. The local real estate landscape has witnessed the launch of several new projects in Mosman, Cremorne, Neutral Bay, Crows Nest, Willoughby, and Greenwich, all of which have garnered significant popularity. This influx of new projects reflects the ongoing demand for modern and well-located developments in these areas.
One notable trend involves downsizers opting to stay in familiar surroundings – staying within the same community as the family home is the aspiration. Additionally, 4-bedroom townhouses have gained traction, particularly among families downsizing with older children still at home. With the interest rate cycle appearing to have peaked, there’s renewed activity from first home buyers and investors, with a specific focus on 1 and 2-bedroom apartments.
Meanwhile, stringent controls implemented by the NSW Building Commission and the Department of Fair Trading are shaping the landscape of new construction projects. These controls emphasise build quality, certification, and the establishment of construction funds set aside for independent audits 15-18 months post-completion. These measures are crucial in ensuring the high quality of new developments across the entire region of New South Wales, fostering buyer confidence and contributing to the overall improvement of the real estate market. We welcome them.
The rental landscape is delivering for investors across the Lower North Shore, particularly in the 1 and 2 bedroom markets where market strength persists. Affordability limits in these segments appear to be flexible, evidenced by consistent high demand with 30 or more groups showing interest. Even a slight increase in rent by $50 doesn’t seem to deter the significant interest, with 5-6 groups still actively engaging with the properties.
Contrary to the usual rush in the pre-Christmas and school-year relocating market, which has been a consistent pattern for the past three years, the anticipated surge did not materialise in the recent period.
Interestingly, despite the prevalence of investment properties coming to the market for sale, tenants seem to be showing reluctance to buy those properties. This could be indicative of a strong preference for the flexibility that renting offers. A noteworthy development is the increase in sharers (friends, flatmates and peers living together) in suburbs like Willoughby, typically known for family homes. This demographic trend is driven by housing affordability and lifestyle preferences.
The holiday season brought about a notable surge in retail and commercial sale enquiries, hinting at a potentially robust year ahead for sales. The positive response during this period raises expectations for a strong increase in sales activity in the coming months.
While investors are becoming more active in sales, there is a distinct preference for retail premises over office spaces. This shift in interest reflects evolving market dynamics and the considerations of investors in the current economic climate.
A rise in properties coming onto the market for sale has been observed, possibly driven by uncertainty in Australia’s financial environment. Investors seeking to liquidate their assets could be a contributing factor, and this trend is anticipated to continue into 2024.
Notably, there’s been an influx of lease enquiries, particularly around the Northern Beaches, with Balgowlah emerging as a prominent location. This surge in lease interest underscores the ongoing demand for commercial spaces in specific regions, presenting opportunities for both property owners and potential lessees.
2023 was a challenging period marked by heightened investor uncertainty and a decline in consumer confidence, our team has demonstrated remarkable consistency in achieving strong results. In the midst of prevailing economic uncertainties, the hope is to see interest rates lowered to pre-inflation levels, which could further contribute to the market’s stability.
Lending activity is on the rise, with the tail end of 2023 marking the best quarter we have experienced to date. First home buyers continue to display resilience, making concerted efforts to enter the market. Their determination is a noteworthy aspect of the lending landscape.
Mixed signals from the Reserve Bank of Australia regarding interest rates create an interesting backdrop. Despite uncertainties, the prevailing sentiment suggests that the market may have reached its peak. This may influence borrower behaviour and lending trends.
As we navigate through 2024, the market’s trajectory will be closely tied to the delicate balance between supply and demand, the impact of interest rates, and the evolving preferences of discerning buyers in Mosman. Last year, the inability of supply to meet the demand was particularly evident for houses, especially those in the coveted Balmoral Slopes, with residences priced at $10 million and above sold successfully. The scarcity of such properties led to notable price growth. We expect to see more of the same this year.
A distinctive “interest rate effect” was observed in central Mosman streets like Holt, Spencer, and Glover. After remarkable pandemic-driven increases, homes in the $4 million to $7 million range experienced more sustainable growth in 2023. The stability and potential sustained growth in this category hinge on interest rates plateauing. However, the caveat remains on the supply side – an increase in housing supply could alter the landscape.
Concerning “already built luxury apartments,” the outlook is positive, with solid growth in prices expected due to a chronic supply-chain shortage and a continuously expanding buyer pool driven by an ageing population.
Buyer behaviour in Mosman showcases a shift away from irrational spending. However, when a property aligns with 80 percent of a buyer’s requirements, competition reminiscent of a boom market ensues. This nuanced approach to purchasing underscores the discernment of buyers in Mosman, where meeting a significant majority of criteria triggers intense competition for upper-end sales.
The outlook remains optimistic, but the market’s resilience will be tested by factors such as supply dynamics and broader economic influences.
In the final quarter of 2023, 35 Cammeray properties changed hands, reflecting a substantial increase compared to the 23 transactions (up to 10 houses from 6 and 25 apartments and townhouses from 17 apartments) recorded in 2022. Notably, the record for a semi in Cammeray reached new heights with the sale of 3 Lytton Street at an impressive $4,250,000, achieved by our dedicated team.
Looking ahead, there are expectations of a surge in supply throughout 2024, coinciding with a rise in potential buyers, as indicated by Loan Market pre-approval figures. The Upper North Shore office is signalling a notable uptick in stock levels, suggesting increased downsizer activity for Cammeray and the broader Lower North Shore market in the coming months. These developments paint a dynamic and optimistic picture for the real estate landscape in Cammeray.
The harbourfront real estate market experienced a notable shift in momentum at the end of last year. Initially sluggish in October, it transitioned into a more vibrant state from early November, culminating in an electric final six weeks of the year. This surge in activity was fueled by buyer confidence, influenced by media suggestions of a potential plateau in interest rates.
As we move into 2024, new listings and heightened demand from eager buyers show the market poised for an energetic beginning to the year, reflecting the positive sentiment carried over from the closing weeks of the previous year. Noteworthy is the surging demand for small homes and luxury apartments, and with an anticipated increase in supply, one can expect a corresponding rise in property values. This shift in demand signals a preference for both compact and high-end living spaces, further influencing the market dynamics.
A unique dynamic on the auction floor is the continued advantage held by downsizers. Their ability to tap into cash reserves positions them favourably, enabling them to outbid younger buyers. An additional point of interest lies in the Upper North Shore market where owners are evidently moving in significant numbers, exiting from Roseville through to Wahroonga, seeking the appeal of convenient village living in the Lower North Shore. This trend highlights a geographical shift that could impact both regions and is worth monitoring for its potential implications on property dynamics.
Local agents in and around Willoughby, including Castlecrag, Northbridge and Naremburn, have shifted their focus away from off-market sales, instead bringing a multitude of properties to the market. This strategy is bolstering volume and attracting a larger pool of buyers, consequently intensifying market competition.
In our areas, four-bedroom homes with two bathrooms, two living areas, and an open-plan design, particularly within the $4 million to $5.5 million range, are thriving.
We’ve observed a notable surge in enquiries for unrenovated properties, appealing to buyers looking to personalise their new homes.
Foreign investment is significantly contributing to premium prices, with Californian bungalows and Federation homes, offering ample value-adding opportunities, performing exceptionally well.
The overall real estate market in the suburbs we operate in remains robust, with a surplus of available properties. Remarkably, despite earlier forecasts and higher interest rates, the median house sale price this quarter stands at $3.4 million, surpassing the previous market peak in 2021, which had a full-year median of approximately $3.35 million. This area’s real estate market continues to demonstrate its strength and resilience.
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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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 … Read more