February 2, 2014 by Craig Pontey
With Australia Day behind us it’s back to work and back to school for most of us, the holiday season is over and already the team at Ray White Double Bay is seeing big auction numbers building for the start of the year. But before we dive into 2014; ten points if you can recall the winner of last year’s Melbourne Cup…it was Gai Waterhouse’s Fiorente, with Melbourne Cup Day being regarded as the start of the summer holiday and party season it’s just a reminder of how fast time and events move on. Markets also tend to move fast and just as Fiorente was in the winner’s circle there were headline reports of rising house prices, a robust share market and a surge in consumer confidence. All of which, as we all now know, went on for the remainder of the year.
Predictions are never easy, but we all have an appetite for them, and so just what might be some of the big trends for 2014, and that includes how real estate markets closer to home across Sydney’s East will be impacted, there’s a lot to consider, because if one thing is very clear, it’s the fact that today’s market are very complex. Market conditions can never just be put down to this or that trend, many factors play a part in shaping markets and that is the case for 2014.
The Big Picture
The confidence that was headlined back in November was partly a reflection of the results of the Federal Election, held just two months earlier and in 2014 a number of big policy issues are on the agenda and for the first time in many years the May budget will be under scrutiny and there could well be impacts for the real estate sector. A review of the tax system and a review of Federal Government spending will both be tied up with this years budget – a question remains if any of these events will result in big policy shifts.
Other big ticket items will include the fate of interest rates, the level of the Aussie Dollar, how active off-shore buyers remain, structural changes across industry policy, continued demand and availability of credit (including the role of SMSF investments) and a possible continued rise in unemployment numbers. All combined these areas will then impact business and consumer confidence; if both areas remain solid this will be good news for real estate markets and in particular high-end homes which require a strong and robust economy with sustained business confidence in particular.
Our Own Backyard
Closer to home we also face a very interesting market, and as I already noted, there is a solid inventory of homes already being listed for auction in February. Across NSW the review of Planning Legislation is under a cloud, this does have direct repercussions for the East as we are facing a shortage of apartment supply, in particular there is continued demand from buyers looking to down size.
We have big numbers of Baby Boomers looking for a local change; these same buyers are also looking for sound investments not only for themselves but also for their children. Recently there was some publicity reporting that Cate Blanchett had purchased a near $2million apartment in Elizabeth Bay for her kids, however Cate is not alone and this has been a strong trend for some years. I have seen this as a constant area of demand in the marketing of the Advanx and ADVANXeast projects at Rushcutters Bay; the project has excellent rental and lifestyle credentials, which underscore the trend.
A few other areas we will need to keep an eye on in our own backyards include; plans for possible amalgamation of local councils, ever more pressures on public space (as clearly evidenced by the debate over the use of Centennial Park and its amalgamation with Sydney’s Botanic Gardens Trust), the roll out of the new South-East light rail and the need for more high and medium density housing.
Looking Forward While Looking Back
Over my holiday break I came across advertising for a do it yourself holiday home, the holiday ‘hut’ – today what we would call an ‘escape’, could be built in 3 weekends, for a cost of just 140 pounds. The year was 1957.
I also came across an article from 1984, which strangely does not really seem that long ago! The article listed what were the key features that any development would need to satisfy in order to attract buyers who might be looking to retire from the family home (today’s baby boomers) this list included; a project that was carefully designed, well located, well managed, close to shops and access to public transport. Thirty years later nothing has changed.
One final comment, and that has to do with Sydney’s rising number of $1,000,000 homes, a survey, which Ray White was in fact first to launch. It appears that 20 years ago only Point Piper and Vaucluse made the grade now we have 163 contenders, but taking into account inflation the benchmark might be better set at $1,600,000 as like for like you would need that amount to buy a similar property today as the $1,000,000 from 1993 is today now only worth $612,000. Still it does remind us how much Sydney real estate prices continue to grow. Might be time for a $2,000,000 or even $5,000,000 index?
Already it looks like 2014 is going to be an interesting year for all real estate markets and I am looking forward to sharing the journey.
Click here to view Craig’s Blog