Adriana Bond and her partner, both 27, are about to move into their new terraced house in Paddington, Sydney. It backs on to a park, has a giant glass window on the top floor and they bought it for A$1.4m ($950,000), nearly half a million Australian dollars less than it was priced at earlier in the year.
Bond cannot believe her luck. Paddington, or “Paddo”, is, she says, the most charming place to be. “We couldn’t have done this 12 months ago without paying a stupid amount of money.” “House prices were the best we’d seen in a while and so that, in conjunction with the lowered interest rates, was the reason we bought.”
But for many like her, the respite from Sydney’s expensive property prices may be all too brief. After a steep drop in house values since 2017, Sydney prices are creeping back up.
The market downturn came after the government tightened lending rules and when Chinese buyers retreated following capital controls introduced by the Chinese government and the doubling of stamp duty for foreign buyers in Australia. The median house price in Sydney has dropped 9.1 per cent in the past year to $1m. House sales — which have dropped 18 per cent nationally — are down more than 21 per cent in Sydney.
But while overall price growth for this year will be negative, Sydney has seen an increase of 4.1 per cent between June and September, lessening the yearly drop to 5.3 per cent for the 12 months to September, according to Michelle Ciesielski, a partner at Knight Frank estate agents.
The Reserve Bank of Australia, the country’s central bank, said last month that cuts to interest rates — now at a record low of 0.75 per cent — and some easing of lending regulation may have helped bring back demand.
“The share of loans going to first-time buyers has increased significantly in Sydney and Melbourne,” says Shane Oliver, economist at AMP Capital, who puts this uptick down to lower prices and first-time buyer stamp duty exemptions introduced by the government. At Bresic Whitney Estate Agents, approximately 25 per cent of sales go to first time buyers, compared with 15 per cent earlier this year.
Some buyers were “waiting on the sidelines for the election result that was going to make investment in property less attractive”, Oliver says. The Labour party, who were tipped to win the election in May, had proposed to halve the capital gains tax discount and to limit negative gearing, a policy that allows rental losses to be deducted from other income. Michael Pallier, managing director at Sydney Sotheby’s International, says that after the election, “it was like a tap turned on” and the Sydney market rose by 5 per cent.
For Lucinda and Pyke Gunning, the rebound is coming too soon. The lawyer and marketing executive, who are in their thirties and have a two-year-old child, rent a property in the inner west part of the city. The prices in their neighbourhood did not fall far enough to meet their budget. Now as the market turns, they are thinking about leaving Sydney altogether. “We are feeling anxious about how we will cope financially with two young kids when the new baby comes — a move back to [my hometown in] Tasmania may be something we need to consider,” Lucinda says. McGrath is selling a four-bedroom house in Lilyfield at auction next week with a guide price of A$1.95m.
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Nicki Hutley, an economist at Deloitte Access Economics, says that Sydney’s house prices are rebounding too quickly. “We’ve just come off this construction cycle where a lot [of new homes have been] coming on to the market but the [central] bank is saying that it will not be long before we have a shortage again.”
Because of well-publicised faults found in some of Sydney’s new developments, including bad waterproofing and flammable cladding material, some consumers are wary about buying anything that has been built in the past five years, she says. The Gunnings left their last rental property when they found that the whole building had no external waterproofing, causing their apartment to flood and fill with mould when it rained.
Sydney prices are expected to rise further in 2020 — by nearly 8 per cent, according to Moody’s. Hutley says: “You can’t go to a Sydney party without hearing an Australian talking in one breath about how much money they’ve made, and the next breath they’re talking about how the next generation is priced out.”
- Millions of hectares have been ravaged by bushfires in New South Wales this season, claiming the lives of six people and more than 600 homes. The blazes reached the northern suburbs of Sydney in early November
- Non-resident buyers can only buy new or nearly-new dwellings in Australia and must apply to the Foreign Investment Review Board for permission
- In the past quarter, there were 17,500 property sales, up from 13,400 in March but still low compared with averages of 29,000 in 2017
What you can buy for . . .
A$600,000 A one-bedroom apartment in Surry Hills
A$1.2m A two-bedroom terraced house in Glebe
A$6m A large six-bedroom house in Darling Point
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