This year’s McGrath Report identifies four major themes we believe will drive demand and prices over the next 12 months and beyond. Last week we discussed China growth & the impact of investors and first home buyers; this week I’d like to talk about the prestige market recovery & the urban hubs emerging specifically in Sydney.
Whilst luxury property was lagging compared to the rest of the market, there are clear signals that it is stirring from its slumber & we are expecting material price rises above $2M this year.
Political & economic stability, rising business confidence & increasing overseas demand is driving new momentum in prestige property after several years of post-GFC stagnation.
According to RP Data figures, the number of $5M-plus sales in Sydney was up 13% in FY14 and the number of $3M-plus sales in Brisbane was up 36%. Over about the same time period, Australia’s most expensive suburbs began slightly outpacing the lower & middle markets in price growth, up 11.1% compared to 10.9% (middle market) & 9.2% (lower market).
Directly contributing to prestige market confidence is Coalition management of the economy and improving company profits that have pushed the ASX 200 above 5,500 to be 9.75% higher. Banking & finance executives are once again receiving bonuses & as always, they are spending that money on property by upgrading their homes.
Ex-pats are also back, largely due to the weaker dollar & a higher number of prestige homes coming onto the market giving them more opportunity to buy now before prices begin to rise. Most ex-pats have no plans to return soon and are only buying now due to the expectation of imminent price growth.
As infrastructure unlocks pockets of Sydney by creating local employment opportunities & reducing commuting times, values are likely to surge in some areas as families seek more value for money.
Five of the nation’s top 10 fastest selling suburbs are in Sydney’s west, with an average selling time of just 12-15 days. They are Old Toongabbie (houses); Parklea (houses); Quakers Hill (apartments);
Lalor Park (houses) and Werrington Downs (houses).
There are three major growth areas in Sydney targeted for new jobs & affordable housing in the long term.
- The Western Sydney Employment Area will be the state’s largest new employment space, creating 57,000 new jobs over 30 years & up to 212,000 jobs when fully developed. Sydney’s second airport at Badgerys Creek will create 35,000 new jobs by 2035, increasing to 60,000 by 2060. Construction will begin in 2016, creating 4,000 jobs initially. First flights expected mid-2020s. A $3B road infrastructure program will commence shortly.
- The South-West Growth Centre incorporates 17,000 ha including Liverpool, Camden & Campbelltown LGAs. Major new centre at Leppington serviced by the new South West Rail Link. About 110,000 new homes to accommodate 300,000 people – almost the population of Canberra
- The North-West Growth Centre incorporates 10,000 ha including The Hills, Blacktown & Hawkesbury LGAs. There is a major new centre at Rouse Hill serviced by the North West Rail Link & upgraded Richmond line. About 70,000 new homes to accommodate 200,000 residents
The NSW Government’s Urban Activation Precincts program is fast-tracking new housing, jobs & has upgraded infrastructure in 8 key urban hubs away from the CBD. These areas include North Ryde Station, Epping Town Centre & Herring Road, Macquarie Park in Sydney’s north, Carter Street, Lidcombe in the west, & Wentworth Point in Sydney’s inner west.
A significant number of Sydney buyers are giving up on the expensive inner ring & buying in the middle ring, which has experienced some of the strongest price growth in FY14. They include North Rocks (up 23%), Northmead (16%) & Baulkham Hills (15%), according to Australian Property Monitors.
Next week, we’ll look at the ACT property market and the local trends impacting property prices there, along with my top suburb picks. Meantime if you’d like a copy of the McGrath Report, or you can read it online by clicking here.