Home' API Magazine : June 2014 Contents 83
API JUNE 2014
JUNE 2014 API
“Be organised, know what you’re looking
for, have a plan and the right support
team around you. Think location first,
Harvey doubts the market will increase
by another 20 per cent but believes
there’s still a long way to go. Those who
wait another year or two might end up
paying another seven per cent, he says.
“What you’ll find is the market will
continue to rise, it will possibly have a
correction and then flatline,” he says.
“It doesn’t correct much unless there’s
a major liquidity crisis like the global
financial crisis. During the GFC prices
went back four to five per cent but the
upswing was well above those ranges.
The thing that’s underpinning Sydney
now is undersupply. We need to build
50,000 to 60,000 dwellings a year and
we’re probably constructing half of that.”
He adds the reason Sydney continues to
have a strong upswing is because there’s
so much pent-up demand.
“Sydney has been playing catch-up
and we’re not seeing any evidence of a
slowdown. There’s pent-up demand from
upgraders, first homebuyers and very
strong investor activity, driven off the
back of low interest rates and a strong
¿ THINK LONG-TERM
Anyone who buys in Sydney now should
be thinking long-term, not short-term,
because there’s a slim chance you’ll find a
‘bargain’ at the moment.
Slack-Smith says investing is a long-
term strategy and shouldn’t be viewed as
a ‘get rich quick scheme’. So what you
pay today is probably far less than what
you would pay in 10 or 20 years.
“The reality is that although the cost
of living increases, so does earnings.
Depending on who you listen to, in reality
terms, affordability is at its best or its
worst. If for a moment you take all of the
noise out of the equation and you look at
your individual circumstances, then you
can decide if buying anywhere suits you.
It comes down to how many properties,
worth how much and earning how much,
will get you to your financial goal.”
Why prices will wincrease
> The Sydney house price surged by
$100,000 to a new record median of
$763,169 following strong growth of
six per cent in the December quarter
> Its median house price increased by
15.1 per cent over 2013, which was the
best annual result since 2009, when
values lifted by 12 per cent.
> Sydney unit prices rose by 4.3 per
cent over the December 2013 quarter
to $541,992, following an increase
of 3.7 per cent over the September
> Over 2013, Sydney unit prices increased
by 10.9 per cent, with the median unit
price also a new record at $541,992.
SQM Research managing director Louis
Christopher made a bold prediction late last
year, claiming Sydney prices would rise a
further 15 to 20 per cent in 2014. He says
so far, that figure is on track.
“We’re very confident it’s going to happen,”
“I would say it’s the strongest opening I’ve
seen in all my years I’ve covered the market,
which goes back to 2000.”
He adds January had a record low number
of properties listed for sale. More properties
came on in February but March figures also
“If anything, our forecast (of a 20 per
The Sydney boom
cent increase in prices) might come early.
It’s pretty much there now. That tempo is
already there on an annualised basis.”
He expects competition to remain tough,
with the Sydney vacancy rate hovering
around a low of 1.7 per cent.
“Sydney was the outperformer of the
capital cities over the year, with a 2.1 per
cent increase in asking rents for houses and
a 3.9 per cent increase in asking rents for
units,” Christopher says.
Another incredible year for the Sydney
market might seem ridiculous, but Christo-
pher points out Australia’s world-class city
underperformed for 10 years and is now
simply playing catch-up. Until 2013, growth
was only about 2.8 per cent per annum.
However, he warns more supply will even-
tually come onto the market, following a
recent surge of building approvals. He says
it normally takes about two years for devel-
opments to be completed and new stock
will influence the market in 2015 and 2016.
“It’s a long way between now and then,”
“We could have an interest rate rise and if
we do it will also slow things down.”
She adds capital growth is what
helps you build a portfolio and buy
“But the rental return is what will
allow you to pay all the associated
costs, week in and week out, so that’s
RP Data researcher Tim Lawless believes
low supply will continue to drive growth,
while colleague Cameron Kusher adds the
levels of seller discounting are the lowest
they’ve been since early 2010 for houses
and mid to late 2010 for units.
But be warned. Slack-Smith says it’s
imperative investors don’t go past their
budget. They should factor in interest
rates rising by 2.5 per cent and work out
cash flow. Don’t get caught up in the hype
at an auction either – know your limit and
be prepared to stop bidding, even if it’s
your dream property.
“Then determine, does the future capital
growth and rental yield of your targeted
area fit into what your portfolio needs to
look like in 10 years to give you a passive
income of $50,000? If, and only if, you can
say yes to those things, you’ll be able to
consider if it’s too late to buy or not.”
HOUSE AND UNIT PRICES SURGE IN 12 MONTHS
Type DEC12$ JUN-13$ SEP13$ DEC13$ QOQ% YOY%
Houses 663,278 693,064 719,769 763,169 6.6 15.1
Units 488,799 501,3 84 519,850 541,992 4.3 10.9
Source: Australian Property Monitors. QoQ – quarter on quarter. YoY – year on year.
æFor an average unit you’ll see about 90 to 100 groups
attending inspections during the four-week auction
campaign and around 15 contracts issued.Æ Rich Harvey
NSW \\ THE STATES
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