sydney property market, page-4

Hi Mikey

I think the following article paints a pretty good picture of the current Sydney property market.

IMHO:
. The market is 'patchy', some areas have weakened more than others. But don't take TOO much notice of this, it's just an observation.

. The usual rules still apply - 'buy the worst house in the street' and 'position, position, position'.

. If your mate wants to make some capital gains as well as buying a residence, he should maybe be looking in areas where prices rose more quickly when the market started to boom a few years ago, rather than more recently as these are the suburbs where prices will take off more quickly during the next up-swing.

. Buy something he can definitely afford and then think of up-grading in say about seven years, rather than run the risk of over-extending himself now.

. I maybe wouldn't be buying until after the elections as in MHO if Labor gets in, interest rates will move UP as they'll be on the big spend and historically Labor aren't good managers of Australia's economy.

cheers
Lekki

Sydney's housing market
With Sydney housing less affordable than ever, the state government is trying to help first home buyers. And prices have begun to fall.

Sydney's housing bubble continues to deflate - just don't tell the 30,000 first home buyers lining up to spend their stamp duty bonus.

New figures suggest that Sydney house prices fell sharply in the March quarter.

And there are fears of further price falls with the introduction of new state tax measures under which land tax will be extended and property investors will be slugged with a 2.25% 'exit' tax.

Yet the deflation of the property bubble also carries opportunities. Thousands of first home buyers can look forward to savings of up to $18,000 thanks to new stamp duty exemptions, injecting some much-needed impetus into the lower end of the market and boosting housing affordability.

What's been happening
A horror weekend of house sales in May highlights the recent slump in Sydney's property market.

While auction clearance rates have languished around 50 per cent for most of this year, nearly two-thirds of properties for auction on the first weekend of May failed to sell. The dismal adjusted clearance rate of 36 per cent marked a new low in the city's rapidly cooling property market.

The slowdown was confirmed in a separate study, which found it can now take twice as long to sell a Sydney house as it did two years ago. The analysts at Australian Property Monitors found it took an average Sydney home owner 63 days to sell their property - double the sale time recorded at the height of the boom in early 2002.

Commenting in The Australian newspaper, APM head of research Louis Christopher said: "There are not enough buyers and the price expectations of vendors are still too high."

Mr Christopher said house prices were falling from the "crazy peaks" recorded at the peak of the boom.

Prices for units tumble

A new study by the Commonwealth Bank has found that Sydney city units have shed 12 per cent of their value over the past year. Prices for suburban units have also dropped in recent months, although median values increased slightly over the year.

Worst hit were units in Broadway, Pyrmont and Chippendale, where the median price declined 12 per cent over the year to $422,500. Prices for suburban units have taken a hit in the past three months, with values declining in Canterbury-Bankstown, the Hills district, Liverpool-Fairfield, Macarthur-Camden, Parramatta and the northern suburbs.

First home buyers straggle back

After bowing out of the market in the face of 2003's high prices, first home buyers are straggling back.

Armed with the Federal Government's $7000 First Home Owners Grant, first home owners are taking advantage of the new stamp duty exemptions announced in April.

NSW Office of State Revenue figures show that 2650 first-home buyers have taken advantage of the stamp duty exemption on purchases of less than $500,000 since the scheme was introduced.

Half of the buyers who have benefited from the scheme purchased in Sydney's western suburbs. The top five locations were Liverpool, Wentworthville, Blacktown, Sutherland and Gosford.

Affordability remains low
A key reason for the slowdown in house price growth has been the sharp decline in housing affordability. Families buying a typical first home in Sydney face repayments of $36,000 a year, almost half the average household income.

The latest Housing Industry Association/Commonwealth Bank Affordability report found that rising house prices and higher interest rates were making entry to the Sydney property market harder than ever.

To afford a loan for Sydney's median first home, a family must now have a gross annual income of $120,000 - up $23,000 in the past year alone.

What will happen next

The continued slump in housing lending (the number of new home loans fell for the sixth successive month during March) points to a quieter market ahead. According to the Australian Bureau of Statistics, housing loans for owner occupiers fell 1.2 per cent in March while the value of loans for investment housing rose 1.9 per cent to $5.56 billion.

Independent analysts Herron Todd White say the recent low auction clearance rates are the clearest sign yet that Sydney's market is cooling. And they warn that the big price hikes of 2002/03 are unlikely to be repeated this year as clearance rates remain low and sellers opt for private treaty sales.

Areas on the move
With warnings of greater volatility, Sydney's inner ring and harbourside suburbs are likely to be the market stalwarts this year.

A recent survey of property hot spots tipped Sydney's inner ring (less than 10 kilometres from the CBD) and beachside suburbs as likely hot spots.

The study, by the Home Price Guide for the Sun-Herald newspaper, forecast patchy growth around the city with many suburbs showing greater volatility in prices and demand..

Market more subdued to 2006
Macquarie Bank's latest Property Market Outlook 2004 report says the triggers for a property market crash are no longer evident, suggesting a slow yet steady market ahead. Key exceptions will be city apartments in some parts of Sydney.

"If history is any guide, Australia is not headed for a massive, widespread property crash although the residential property market will be volatile and far more diverse in 2004. For astute property investors, pockets of opportunities still exist," says Macquarie

"Our house price models - recently updated to reflect a significant downgrading of overseas migration estimates by the Australian Bureau of Statistics - show that annual house price growth in many capital cities, particularly Sydney, will be flat in 2004," the report says.

While some areas will out perform, others will remain flat, the report warns. City apartments are of particular concern while inner city houses will be a safe bet.

"Established houses close to the CBDs of major capital cities (10km radius) and beach suburbs, particularly those within the more 'affordable' price range, are the sectors most likely to outperform in an overall flat market. Generic units with little differentiation (such as those built in the 1960s, '70s and '80s) will typically underperform, unless in locations where property is scarce, such as harbour-front suburbs.

"We expect new investment units in parts of South Sydney, Sydney's northern beaches, and Waitara to underperform with a significant volume of supply set to come on stream in 2004," the report said.

Independent analysis firm BIS Shrapnel also believes Sydney prices should stay relatively steady this year and out to 2006, according to a report in the Financial Review.