By John McGrath 

In our 2015 McGrath Report, we released some specially commissioned research showing Sydney’s inner ring now has a median house price above $1.5 million and the middle ring is above $1 million. This means the zone within 20km of the CBD is now too expensive for more than 90% of Australians based on their ability to service loans beneath the widely-recognised mortgage stress test of 30% of household income^.

These figures from CoreLogic RP Data show a rising ‘Manhattan effect’, with the inner ring increasingly becoming the exclusive domain of high income earners. Household incomes of around $270,000 per annum* in the inner ring and $195,000 in the middle ring are required to service a typical loan. Even Sydney’s less expensive outer ring requires a household income above $100,000 for most people to avoid mortgage stress. 

Here is a table showing the gross household income required to pass the mortgage stress test in the inner, middle and outer rings of the East Coast capitals. 

Here are the median house and apartment prices for the inner, middle and outer rings of the East Coast capitals. 

 

So what do we do about this? Social demographer Bernard Salt posed the following question in an article published by The Sydney Morning Herald in June this year:

“It’s almost like the Manhattan effect. You only attract rich people on to the Manhattan island, and the rest live out in Brooklyn. Should a global city like Sydney really offer a place for everyone? That’s a social question.” 

Over the past few decades, we’ve seen Sydneysiders adapt to the city’s rising affordability issue in many ways. The classic scenario involved moving further out from the CBD where bigger houses were more affordable. That was then. Today, you need around $625,000 to buy just an average house in the outer ring, which is defined as 30km from the city centre. That’s a lot of money and a long way to commute just for the privilege of living in Sydney. 

Other trends prompted by affordability have included families choosing apartment living over houses so they could buy a home for less in a better location; as well as families moving to regional locations within a 90 minute commute, such as the Central Coast and Wollongong. 

We believe the next step is leaving the city altogether. 

We’re not expecting a mass exodus, but we do feel that Melbourne, Brisbane and NSW coastal regions will become increasingly attractive to the rising number of Gen X middle income earners who are simply tired of Sydney’s higher cost of living. The next generation of families among the more nimble, lifestyle-focused Gen Y will inevitably follow. 

There’s evidence of this now, with latest Australian Bureau of Statistics data showing an increasing number of Sydneysiders migrating to nearby commuter seachange locations while others are heading to Melbourne. In fact, Melbourne’s population has been growing faster than Sydney’s since 2000 and its net interstate migration is at its highest point in 40 years. In 2014, almost 30% of that interstate migration came from Sydney. 

Further, in two out of three models used by the ABS to project future city populations, Melbourne will overtake Sydney in either 2030 or 2053. Let me say that again. Melbourne’s population is going to overtake Sydney’s – and a big reason is interstate migration. 

Times are changing for Sydney. Stay tuned. 

* Median gross household income required to pass the mortgage stress test of no more than 30% of income used to cover home loan repayments. Based on median priced houses (80% LVR Principal & Interest Loan over 30 years at 4.75%)

^ Calculations based on most recent ABS Household Income and Income Distribution report (2011-12). Mortgage data supplied by oxygen.com.au based on 80% LVR Principal & Interest loans over 30 years at today’s discounted standard variable mortgage rate of 4.75%. Mortgage stress is widely recognised as using more than 30% of gross household income on housing costs.

By John McGrath

In preparing this year’s McGrath Report, we wanted to look forward and consider the game-changing trends we expect to see in the Australian market over the next five to 10 years.

This week, let’s look at how new infrastructure is bringing the outer and middle rings of our East Coast capitals closer to the CBD, which is vital for city workers looking to afford their own home.

Major projects in Sydney, Melbourne and Brisbane are shortening the city commute and unlocking affordable outer suburban areas previously dismissed by city families for being too far to travel for work. In turn, this is providing growth stimulus for local property prices.

History shows that major infrastructure can have a direct and meaningful impact on property prices, so we see a dual advantage for buyers purchasing along new infrastructure routes today.

In compiling our report, we worked with CoreLogic RP Data to prove a definitive link between new infrastructure and a boost in property values. We also identified the best new projects currently underway that we feel will have a big impact on local property prices. 

Here are just a few examples – if you would like to see more, please view our 2015 McGrath Report here or call in to one of our offices to collect a free printed copy.

Sydney

New projects

WestConnex - 2015-2023     

WestConnex is the biggest transport project in Australia today. It involves a 33km link between Sydney’s far west through to the city, airport and Port Botany precinct, bypassing 52 sets of traffic lights.

The project will result in significant travel time savings by car and bus. Commuters travelling by car from Parramatta will save 25 minutes to the CBD and 40 minutes to the airport. About 10km of new bus lanes will halve the CBD commute from Burwood. WestConnex will also divert 3,000 trucks off Parramatta Road per day.

Past projects

M5 East Motorway - 1998-2001

Brisbane

New projects

Moreton Bay Rail - 2013-2016

Moreton Bay is home to 350,000 people, making it Australia’s third largest LGA and one of the fastest growing, with the population to tip 500,000 by 2031. This $1.147 billion project involves a new 12.6km dual-track rail line, with every full train taking 600 cars off the road. There will be six stations at Kippa-Ring, Rothwell, Mango Hill East, Mango Hill, Murrumba Downs and Kallangur connecting to the existing Petrie to Brisbane city line. 

* by car

Inner City Bypass (ICB) - completed 2002

Melbourne

New projects

Melbourne Metro Rail Project - 2018-Mid 2020s                                        

Beginning at Kensington and ending at South Yarra, this $11.5 billion project will include a mix of new underground rail tunnels, stations and interchanges within the CBD. It is designed to increase the capacity of Melbourne’s busiest train lines and should allow for an additional 20,000 passengers in peak hour. Increased services resulting in the prevention of overcrowding will shave 10 minutes off the CBD commute. 

*by train

Past projects

Eastlink Freeway - 2005-2008

Source: House price growth from CoreLogic RP Data

By John McGrath

Over the past few weeks, we’ve focused on market trends in the major east coast capitals of Sydney, Melbourne and Brisbane that we looked at in our annual McGrath Report. This week, we’re going inland to the nation’s capital, where a two-tier market has formed as house prices rise, while apartment prices stumble. 

This year, houses have been performing far better than apartments. For the first time since 2008, we saw three consecutive quarters of house price growth in December 2014, March 2015 and June 2015, which indicated to us that change was afoot in Canberra. 

So far this year, Canberra has recorded the third highest growth in house prices behind Sydney and Melbourne, with values up 4.7% as of the September quarter, according to newly released figures from CoreLogic RP Data. This compares with 14.6% in Sydney, 14.3% in Melbourne and 2.9% in Brisbane. 

This price growth has largely been due to a lack of houses for sale, which has created a favourable supply/demand dynamic for vendors. 

We have seen more auctions and better clearance rates, as well as a number of suburb records, including four achieved by our offices in O’Connor ($2.2 million), Forde ($1.225 million), Crace ($1.215 million) and Downer ($960,000). 

Since mid-2013, almost 10,000 public service job cuts nationwide have made Canberra residents reluctant to make large financial decisions. However, this appears to be over, with Budget papers showing only 70 jobs are expected to go in FY16, and this is injecting some confidence back into the market. 

Canberra has the highest incomes of the capital cities, so it is less likely to experience the affordability issues of Sydney, and this is also underpinning house price stability. Families on good incomes in secure jobs are now happy to upgrade their homes, especially while interest rates remain so low. 

The ‘Mr Fluffy’ buyback scheme, under which the government is buying back homes contaminated by loose-fill asbestos, has provided a significant boost to the market. 

Of the 1,022 homes affected, 1,014 are participating in the scheme and 879 offers had been accepted as of early August, with a further 59 acceptances by late October. 

Home owners have been well-paid for their asbestos-ridden homes, and with the additional benefit of a stamp duty credit on their next purchase, they have had a significant advantage over other buyers.

Most Mr Fluffy home owners have sought to buy back into the same areas, but some have taken the opportunity to move from older outlying suburbs into the blue-chip Inner North and Inner South, or the Gungahlin region where brand new suburbs, houses and amenities are very appealing.

The city’s apartment sector will remain soft for the foreseeable future, with ABS data showing a further 2,917 approvals for 2014-15 – the highest number in three years. 

Massive stamp duty concessions available through the Over 60s Home Bonus Scheme have proved popular in the Inner North and Inner South. Introduced in 2014 for a period of two years, the scheme has encouraged many older couples to downsize into single storey houses or townhouses. Just $20 stamp duty applies to purchases up to $625,000 with a sliding scale of fees from there. 

In other news, excitement is building around the planned Capital Metro light rail project connecting the city to Gungahlin. It will create jobs, take cars off the road and reduce the city commute to 25 minutes. This is more important for the future, as current analysis predicts the morning run could take up to an hour by 2031 without the light rail in place. 

The light rail will also connect the growing Gungahlin district to the vibrant restaurant scene of the Inner North and CBD, so we see a great lifestyle benefit here too.

By John McGrath

In last week’s column we covered what’s happening on the ground in Brisbane, as reported in our recently released annual McGrath Report. 

This week, let’s look south to Melbourne, which, like Brisbane, is attracting an increasing number of investors and young family buyers from Sydney following several years of extraordinary price growth in their home city. 

The Melbourne market has shown ongoing strength in 2015, with the median house price rising above $700,000 for the first time. Figures from the Real Estate Institute of Victoria (REIV) show house values rose by 5% to $706,000 in the June quarter, while auction clearance rates reached a five-year high for the month of June at 78%. 

Properties have also been selling in record time. REIV data released for the September quarter shows the median days on market is now 34 – 5 days shorter than in 2014.  

Record low interest rates and unprecedented interstate and overseas migration and investment are combining to fuel the Melbourne market. Victoria’s population has increased by more than 100,000 people over the past 12 months, with net interstate migration at its highest level in 40 years and net overseas migration accounting for half the state’s growth, according to the Australian Bureau of Statistics (ABS).

The declining Australian dollar is making local real estate even more attractive to an already active overseas investor market, with remarkably high sale prices for prestige homes and off-the-plan projects recorded this year, mostly in the eastern suburbs.

Victoria remains the most popular destination among wealthy foreigners using the Significant Investor Visa; and Credit Suisse estimates 14% of new apartments are being purchased by Chinese investors alone.

In July, the Victorian Government increased stamp duty for foreign purchasers by 3% in response to community concern. To enforce the new law, all home buyers must now complete the Duties Form 62 Purchaser Statement declaring whether they are a local or overseas purchaser.

The quality of schools is becoming a determining factor for Melbourne family buyers and investors. Melbourne buyers’ agency and research company, Property Analytics, has documented the relationship between VCE scores and property values and found that suburbs with top-performing public high schools have experienced twice the city’s average median house price growth over the past three years.

Overall, Melbourne has a two-tier market with an oversupply in apartments resulting in lesser capital growth. According to CoreLogic RP Data, Melbourne apartment prices rose by just 2% in the 2015 financial year. 

Things are looking up though, with a 3.9% bounce in prices over the September quarter. 

In 2014, residential zones were reformed across Victoria to direct new apartment developments away from suburbs with special character, to areas around main roads, shopping centres and transport links. This change has contributed to a 38% increase in non-house dwelling approvals in FY15 (house dwelling approvals were up 10%). 

We are very optimistic about the potential for steady ongoing price growth in Melbourne, particularly for houses, over the next few years. Unlike Sydney, Melbourne has much more room for growth because it is coming off a lower base and is still well off the $1 million house price median of its northern neighbour.

There are already indications that an increasing number of Sydneysiders are migrating to Melbourne for job opportunities and more affordable housing. While previous generations of Sydneysiders have stayed and battled affordability issues, we believe the more nimble Gen Y will upgrade between cities – not suburbs, as their families grow.

CLICK HERE TO RETURN TO THE SPRING PROPERTY SPECIAL

In last week’s column I took a look at the local factors influencing the market in Sydney. This week, let’s look north to the Sunshine State for a snapshot on what’s happening on the ground in Brisbane, the Gold Coast, the Sunshine Coast and surrounding regions.

Overall, South-East Queensland has shown stability this year with consistent sales activity, however price growth did slow to just 4% along the Brisbane to Gold Coast corridor for the financial year. The reasons behind this include the lowest net interstate migration in more than two decades; a weak state economy; comparatively high unemployment; and the change of government.  At a macro level, there’s obviously been challenges.

Drilling down though, some areas are experiencing exciting activity. Low interest rates are encouraging upgraders in the $1 million-plus bracket in premium areas such as Ascot, Hawthorne, New Farm, Bulimba and Paddington. Many are choosing to keep their existing homes in the $500,000 to $1 million bracket for investment.

First home buyers are also back, buying in affordable suburbs like Mansfield, Salisbury and Belmont where homes are selling faster than anywhere else in Brisbane, according to CoreLogic RP Data.

Solid demand and a shortage of homes for sale in some areas pushed Brisbane’s auction clearance rate to its highest level on record (since 2009) at 50% for the year to August. By comparison, over the same period of the year, Brisbane recorded 46% in 2014, 40% in 2013, 33% in 2012 and 24% in 2011.

Apartments are a different story, with a rising oversupply in inner city areas like West End, Fortitude Valley, Newstead and Hamilton. Buyers are very discerning and only competing for properties with unique features. Downsizers are snapping up three bedroom properties but the smaller non-descript options are sitting on the shelf.

Typically, an increasing house price gap between Brisbane and Sydney is pivotal in creating new market energy. By August 2015, the gap was $431,500 – the largest gap in dollar terms on record with Sydney house prices 88% higher than Brisbane, according to CoreLogicRP Data.

As a result, we are now seeing a steady flow of Sydney and Melbourne buyers heading north. Southern investors are chasing capital growth and the highest yields of the major capital cities, while young families are seeking affordability and lifestyle.

Owner-occupiers are purchasing Queenslander-style family homes in blue chip areas where they are paying half what they would in Sydney for an equivalent home. Many are leasing these properties for decent yields while they look to secure work before moving here permanently.

On the Gold Coast, the sub-$1 million market has been buzzing with a mix of local upgraders and southern investors and seachangers. It has also been an excellent year for prestige property with the entry level of the region’s Top 50 Home Sales (Gold Coast Bulletin) in FY15 rising to $2.5 million from $1.323 million in FY14.

The China Factor – a key element in Sydney and Melbourne’s booms, is increasingly at play in Queensland and especially on the Gold Coast. The juwai.com property portal reports purchasing intent up by 1,120% YOY, which is not surprising as more Chinese developers build locally and market their projects directly back home.

Construction on the long-awaited $1 billion Jewel hotel and apartment project at Broadbeach by its Chinese owners began in March and the first non-stop flights from the Gold Coast to China have now commenced.

On the Sunshine Coast, the market is bullish especially above $1 million. Locals who have been waiting out the post-GFC downturn are upgrading now and we are seeing a significant influx of southern seachangers. Buderim is among the favourites due to its schools; and lifestyle homes are popular in Noosa, Mooloolaba and Sunshine Beach.

I remain very optimistic about South-East Queensland. The weakening dollar will boost tourism, there are a slew of new infrastructure projects underway and the economy appears to be responding to new political management.

While the Gold Coast has always had a good international reputation, Brisbane is increasingly asserting itself as a sophisticated global city, particularly following the G20 in 2014. The ‘big country town’ stigma of old has been eroded by a continuing undercurrent of social, economic and cultural change.

Once state economic conditions improve and Sydney slows further, the South-East Queensland property market will be ready to roar.

CLICK HERE TO RETURN TO THE SPRING PROPERTY SPECIAL

By John McGrath

Our 2015 McGrath Report is now out and following last week’s column on the national market and macro factors influencing Australian real estate, I’d now like to spend the next few weeks drilling down on the local trends occurring within each of the Eastern Seaboard’s major capital cities. 

So let’s start where all the major action is happening – Sydney. 

This has undoubtedly been one of the most spectacular booms in Sydney’s real estate history. According to CoreLogic RP Data, this growth cycle began in May 2012 and it’s been a strong climb since then. 

On June 30 2013, Sydney’s median house price was $662,500 and it had risen 6.3% over the year. Over the next 12 months we saw another 16.2% rise and a further 17.8% gain by June 30 2015. By September 2015, Sydney’s median house price was $900,000. Soon enough, we’ll have a million dollar median – in fact, some researchers say we’re already there, but everyone measures the numbers a bit differently. 

Further interest rate cuts earlier this year extended the boom, along with strong demand from investors and a shortage of stock that resulted in auction clearance rates peaking at 89% in May. The average time it takes to sell also reached record speed at just 26 days this year. 

Lack of stock has been a big issue, particularly in destination suburbs where existing residents, seeking to upgrade or downsize locally, have been competing with an increasing number of out-of-area aspirants. By mid-May, total stock available for sale was down 21% compared to the year before. Many homeowners delayed selling because buying back in was simply too hard.

Things have since changed. As stated in our McGrath Report, stock levels began to improve in late Winter and by August, stock was only 5% lower than in August 2014. New statistics released since our report was published show stock levels are now 4.7% higher than this time last year.  

In reality, we are probably getting close to the peak of this boom. Interest rates are unlikely to rise for some time but affordability is starting to bite. Prices have risen to such a point that I believe more young families than usual will leave Sydney in favour of Melbourne, Brisbane or major coastal areas. 

Many first home buyers are ‘rentvesting’ (renting were you want to live, and buying an investment property where you can afford) instead, which is a great option. We’re also seeing more investors heading to Brisbane for the highest yields of the major capitals (as well as the Gold and Sunshine Coasts) with all three locations offering excellent prospects for near-term capital growth. 

Tighter investor lending criteria is having an impact in Sydney and this is a good thing, as it is weeding out the investors who are leveraging themselves too highly. However, this is only a speed bump in Sydney’s boom. Investors on good incomes using new equity in their homes or SMSFs are easily able to satisfy the new criteria of lower LVRs, tougher serviceability and slightly higher mortgage rates.

Natural attrition will be what ends this boom – a simple case of prices getting so high that owner-occupiers back off to see what happens next, while falling rental yields and limited prospects for much more capital growth prompt investors to look elsewhere.

Anyone who owns a good quality, well located property in Sydney owns a piece of financial security. Despite predictions that Melbourne’s population will overtake Sydney’s in as little as 15 years, Sydney will always be the powerhouse property market of Australia due to high migration, work opportunities and an undersupply.

And it’s important to remember that boom periods are only part of a growth cycle. While I do expect this boom to cease soon, Sydney prices will continue to grow throughout 2016 – it will just be at a slower pace.

CLICK HERE TO RETURN TO THE SPRING PROPERTY SPECIAL

By John McGrath

We have just released our 2015 McGrath Report, which documents not only what’s been happening in Australian real estate (and particularly the Eastern Seaboard) but we also look at the important trends we see shaping the broader national market over the next five to 10 years.

Over the next month I’ll delve into the issues and trends raised in our report in more detail to give you a good understanding of what’s going on and what’s coming up, so you can make the best decisions for yourself and your family in terms of buying, selling and investing.
 
I’ll start off by saying that I think this is one of the most fascinating periods in residential real estate for the last 50 years. On a national level, the market is in many different stages of recovery.

Clearly, Sydney and Melbourne have been the star performers with 62% and 32% growth respectively since the GFC (2009-2015). These are rapidly growing metropolitan centres that rate highly alongside global cities like Hong Kong, London and New York for lifestyle and commerce.

However, if you look beyond the last few years and review growth in both cities over the last decade, it’s fair to say that longer-term growth rates have not been as extraordinary. In fact, Australia’s two biggest cities both underperformed against their usual 10-year growth rates.

Looking around the country, many other metropolitan markets are in the very early stages of their growth cycle at best. In some instances, they’re still as flat as the proverbial pancake.

Overall, I believe Australian residential real estate is fairly valued and this will remain the case over the long term. When you calculate the growing wealth, the unarguably amazing lifestyle, and factor in the currency discount against the US dollar, we remain an attractive place to live and invest.

Across the Eastern Seaboard, here are the specific locations I rate as the best markets to buy in today based on current opportunity and long term prospects for continuing capital growth.

SYDNEY

The Rocks
A shift in housing stock from Government-owned to private dwellings is bound to bring a massive upgrade to these beautiful harbourside Georgian and Victorian homes. Just a five-minute walk to the CBD and Barangaroo, The Rocks is becoming one of the most fashionable addresses in Sydney.

Kensington
With the recent surging interest from overseas buyers, Kenso will benefit due to its university campus and the upcoming light rail, which will whisk residents in and out of the city and to Moore Park and Royal Randwick.

Curl Curl
The gorgeous Northern Beaches lifestyle is attracting great attention from water babies looking for better value than the Eastern Suburbs. We like Curl Curl’s intimate positioning by the sand and relatively easy access to the CBD, compared to its sister suburbs further north.

Parramatta
Parramatta is buzzing with new commercial and infrastructure activities. Smart companies are relocating closer to employees and the forgotten Parramatta River has found new life. New high-quality medium-density riverside dwellings will establish new pricing benchmarks over coming years.

Engadine
The Shire offers a great lifestyle but as surf-side suburb prices shoot north, areas like Engadine offer an affordable entry point. A budget under $750,000 will secure a home on a 600 sqm block. That’s sensible value you couldn’t spot elsewhere.

BRISBANE AND SURROUNDS

Murarrie, Brisbane is coming of age as young singles, couples and families priced out of nearby Bulimba, Morningside and Cannon Hill venture in looking to renovate.

Everton Park, Brisbane offers a huge range of properties and there is plenty of value for money. Investors and first home buyers are competing strongly for the lower priced homes.

Paddington, Brisbane presents the best value among Brisbane’s blue chip suburbs. Over the past two years, Paddington buyers have been venturing into Bulimba, Ascot, New Farm and Hawthorne for better value. Now they are returning following a rejuvenation of Paddington’s café scene.

Paradise Point, Gold Coast has a wonderful burgeoning café scene and offers four bedroom houses for around $700,000 just 200 metres from the water.

Birtinya, Sunshine Coast offers great value and there is plenty of room for growth as the suburb continues to benefit from the ongoing development of the Kawana health precinct.

ACT

Crace is a relatively new suburb and very popular with families due to its modern housing, parks, sporting facilities, cafes and schools.

Forde is the more affordable alternative to Crace, with similar facilities but a $50,000 discount on homes. As Crace property prices grow, we see great upside potential for neighbouring suburbs.

Lyons is a gentrifying sleeper suburb next to Curtin, where property prices are peaking off the back of extremely strong demand. Lyons used to have a poor reputation but this has changed and we are now seeing Curtin buyers expanding their search into Lyons.

Dickson will enjoy long term benefits from the light rail and Dickson centre master plan, which will bring more eateries, expanded retail and streetscape upgrades. Much of the suburb is zoned for medium density development so there is great opportunity for land banking.

Downer is just north of Dickson and will also receive benefits from the light rail and Dickson centre master plan. It offers close proximity to schools and good prospects for price growth.

MELBOURNE

Murrumbeena/Hughesdale/McKinnon is conveniently located close to Chadstone shopping centre, public transport and the CBD. With a selection of high quality secondary schools, the area is popular with both families and investors.

Balwyn is one of the city’s most exclusive suburbs with its tree-lined streets, period homes and large blocks. Some of Melbourne’s best schools have been driving demand from wealthy, affluent buyers.

Glen Waverley offers leading education institutions and public transport options. Million dollar homes are in high demand from a burgeoning Chinese community.

Brunswick is a trendy, multi-cultural suburb with a rich history and a strong rental market. Townhouses and apartments are popular with young professionals, yet there are still plenty of classic period homes.

Williamstown has the charm of a maritime village with its historical architecture, beaches and parklands. It’s accessible by train and ferry and has experienced widespread gentrification in recent years through increased interest from younger buyers.

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By John McGrath

Has the Sydney market peaked? This is the question on everyone’s lips following a few weeks of low auction clearance rates. 

According to CoreLogic RP Data, Sydney’s clearance rate fell to 71% in the third week of Spring. Although that is still a strong result in anyone’s language, it is the lowest clearance rate recorded all year and is well down on the 80%-plus clearances we consistently saw throughout winter. 

So have we reached or passed the peak? 

I’ve been in real estate for more than 30 years and one thing’s for sure – you can never pick the exact peak or trough of a market. It only becomes clear a few months after it’s happened. My best guess is that we are about 80% through the cycle. But that’s no reason for panic. 

It’s important to remember that a ‘growth cycle’ and a ‘boom’ are two different things. Booms occur within a broader growth cycle. Sydney is coming to the end of its boom but the growth cycle will continue for a little while yet. Sure, prices might come back a bit in response to the frenzy going out of the market, but growth will then resume at a slower and more stable pace. 

According to CoreLogic RP Data, Sydney’s current growth cycle began around May 2012. So we’re talking almost three and a half years of growth and within that, at least a couple of years of major boom conditions. The simple truth is it can’t go on forever – if it did, then we’d have problems. The market is cyclical and it’s a pattern you can rely on. 

I’d actually be concerned if Sydney has another year of double digit growth. What we need now is to put a floor under the fantastic growth we have seen since 2012 and consolidate this new level of pricing across the city with a period of calmer trading and price plateauing. 

What’s going to end the boom? 

Well, it’s not interest rates – they certainly won’t be moving north for a while. The restrictions on investor lending are certainly having an effect, given the high volume of investor activity that has powered this cycle, but so far it hasn’t been a crushing effect. 

What’s going to end this boom is simple natural attrition. We’ve had a long run of growth and soon enough it’s going to peter out, simply because it’s due to do so.  

Looking ahead, South-East Queensland is next. It will be Australia’s hottest market for the next three years. We’re already seeing lots of positive signs up north. Investors who feel they’ve missed the boat with Sydney and Melbourne should look to Brisbane and the Gold Coast for opportunities now. 

How much would you have given in 2012 to know that Sydney prices were about to skyrocket by almost 50% over the next three years? Would you have bought? Well, I think you’ll be looking back in 2018 and saying the same thing about South-East Queensland in 2015. 

By John McGrath 

How times have changed. In June 1995, only 1% of house sales in Sydney over the previous five years were above $1 million. By June 2015, that percentage was 36.8%. In 1995, only 0.6% of apartments sold above $1 million. Today it’s 11.6%.

I love to think of all the people who bought property back in the 1990s and are still holding those properties today. Real estate investment should always be a long-term play and these buyers have done incredibly well.

The prevalence of million dollar sales has obviously grown exponentially over the years. What was once the price tag of only the most exclusive homes in Sydney’s best suburbs twenty years ago is now the median price of hundreds of suburbs across Australia.

According to CoreLogic RP Data, there are 437 suburbs across the country in the $1 million club. Just three years ago, around the commencement of Sydney’s current growth cycle, it was half that number at 220 suburbs (June 2012).

These statistics tell us a couple of things. Most importantly, they demonstrate the tremendous wealth that can be generated through property as long as you buy sensibly (location, location, location) with a long-term view.

Secondly, they remind us that the prices we cannot imagine today will be the reality of tomorrow. Twenty years ago, who would have thought $1 million would be considered a basic budget for a family home? Who would have thought a one-bedroom apartment could sell for that? In Sydney today, this is a reality. A million dollars isn’t what it used to be. In fact, one data supplier is already reporting the median house price for the entire city at $1 million.

 Here’s Australia’s top 20 suburbs for median value (houses)

1. Point Piper, NSW $5.596 million
2. Centennial Park, NSW $5.199 million
3. Vaucluse, NSW $4.125 million
4. Bellevue Hill, NSW $3.810 million
5. Tamarama, NSW $3.534 million
6. Peppermint Grove, WA $3.505 million
7. Whale Beach, NSW $3.322 million
8. Dover Heights, NSW $3.250 million
9. Toorak, VIC $3.229 million
10. Watsons Bay, NSW $3.209 million
11. Longueville, NSW $2.996 million
12. Double Bay, NSW $2.950 million
13. Palm Beach, NSW $2.760 million
14. Dawes Point, NSW $2.752 million (apartments)
15. Mosman, NSW $2.701 million
16. Clontarf, NSW $2.683 million
17. Rose Bay, NSW $2.680 million
18. Northwood, NSW $2.575 million
19. Bronte, NSW $2.525 million
20. Dalkeith, WA $2.471 million

Source: CoreLogic RP Data

The No. 1 suburbs in other states

• Forrest, ACT $2.119 million
• Unley Park, SA $1.716 million
• Teneriffe, QLD $1.512 million
• Fannie Bay, NT $1.084 million

Source: CoreLogic RP Data 

Suburbs in the $1 million club across Australia and within the top three states

• 2010 – 262 suburbs (151 in NSW, 42 in VIC, 31 in WA)
• 2011 – 254 suburbs (153 in NSW, 44 in VIC, 29 in WA)
• 2012 – 220 suburbs (136 in NSW, 37 in VIC, 28 in WA)
• 2013 – 246 suburbs (153 in NSW, 39 in VIC, 35 in WA)
• 2014 – 355 suburbs (232 in NSW, 51 in VIC, 46 in WA)
• 2015 – 437 suburbs (302 in NSW, 61 in VIC, 39 in WA)

Source: CoreLogic RP Data

You might also be interested to know that the number of suburbs with a median value of $2 million has also grown significantly from 32 suburbs in June 2014 to 48 suburbs in June 2015. Forty are in Sydney, five in Melbourne, two in Perth and one in Canberra.

As our $1 million club grows, the greatest advantage is for those who already own real estate. The downside is younger Australians are finding it tougher to get into markets like Sydney.

As always, markets evolve and young buyers will find a way. The Gen Ys are ‘rentvesting’ and I think we’ll see more families leaving Sydney for Melbourne and Brisbane soon enough, given the big disparity in median house prices between the three East Coast cities.

By John McGrath

It’s one thing to miss out on a property because it sold above your budget.  That is a reality for many of us.  But it’s an entirely different and much more frustrating situation when you miss out on a property that you wanted to bid on, but it sold prior to auction without you even knowing.  

In Sydney, recent auction results published by the Domain Group show about 30% of properties scheduled to go under the hammer sold prior to the event.  If you want to buy this spring – especially in a boom market like Sydney, you have to be prepared to act faster than the typical three or four weeks that a standard auction campaign provides. 

The only way a property is going to sell prior without you knowing is if you don’t tell the agent you’re interested. You have to make this known in order to be included in pre-auction negotiations. These negotiations can happen very quickly – often within 24 hours, especially if the buyer who makes the first offer puts a deadline on it. In these cases, agents don’t have time to call 200 people who might be interested in the home, they’re just going to talk to people they know are interested in the home. 

Here are my top tips to ensure your dream home doesn’t sell prior without you. 

1. In a hot market like Sydney, you need to tell the agent you’re interested as early as possible. Call them as soon as the property is advertised and even before the first public open. This is important because odds are, the agent already has buyers interested in the property BEFORE it is advertised online (first notification often goes to database buyers; clients of professional buyers’ agents; and buyers that the agent knows personally from previous dealings on similar homes). Receiving offers before the first public open is not uncommon in boom markets, so call the agent right away. There’s no commitment, all you’re doing is flagging serious interest and asking to be kept informed if an offer is made
2. Make sure you have a very strong handle on what your property type is worth so you can make an offer quickly if you want or need to do so. Most buyers are seeking one type of property but are willing to buy in several neighbouring suburbs. The price differential between suburbs can be significant for many reasons, including the suburb’s reputation, school catchment zones, proximity to transport etc. You can research fair market value by looking at recent sales online. Bear in mind that in boom markets like Sydney, sales data that is more than a couple of months old is already out of date. Don’t expect to pay in September what you might have paid in March! 

Why do properties sell prior? 

Here are a few reasons why properties sell prior to their scheduled auction date.

1. Towards the end of a boom period, many buyers who have been in the marketplace for a long time are very fatigued and really want to get a deal done. So they make strong offers quickly in an attempt to remove the property from the market fast.
2. Properties may sell prior when there is only one buyer. It makes no sense to go through to auction when there is only one genuine buyer interested. This scenario is far more common in slow markets.
3. The vendors might be in a hurry. Sometimes they don’t particularly want to wait three or four weeks until the scheduled auction. They tell their agent they want to sell as soon as a certain price is offered.
4. Finally, there might be lots of buyers interested in a property, but only one of them is willing to pay significantly more. For example, if an agent has five buyers and four of them are in the early $800,000s and one of them is at $900,000, it makes no sense to go to auction. The lower budget buyers are likely to stop bidding at $850,000 or $860,000, which won’t push the best buyer to their maximum budget of $900,000. You’re far better off negotiating with that one outstanding buyer prior to auction. 

So remember, talk to the agent and make it clear that you’re seriously interested in the home. Specifically state that you want to be kept informed if offers are being considered prior to auction. 

Good luck!