A flatter property market characterised 2011 for Sydney, yet things are looking brighter for the coming year with talk of consumer confidence creeping back. We spoke with three experts in the NSW property market, Angus Raine, CEO of Raine & Horne, Janusz Hooker, CEO of LJ Hooker and Douglas Driscoll, CEO of Starr Partners to gain insight into the year ahead.
Broadly speaking, what are your expectations for Real Estate in 2012?
Angus Raine (Raine & Horne): We are expecting growth of between 3% and 5% for Sydney real estate in 2012. Plainly, some more interest rate cuts will help encourage buying activity, and it’s important the Reserve Bank moves fast with lower rates in March and April. It’s fair to expect homes between $400k and $650k will be in red-hot demand this year, as this is an attractive price point for investors and first time buyers. As a consequence, traditional apartment markets in Sydney’s inner west, south west, the northern beaches and the St George district are set for a healthy 2012.
Whilst some talk of a property bubble, this has no basis. There is a major shortage of quality homes in Sydney and this shortfall, coupled with increased migration and lower interest rates, will continue to underpin values.
Janusz Hooker (LJ Hooker): Consumer confidence will continue to be key and 2012 presents outstanding buying opportunities for Australian families and investors as we predict more investors will come back to the NSW market as rental returns continue to strengthen.
Douglas Driscoll (Starr Partners): 2012 will continue to see infrastructure growth, new developments and 5-6 % in rental yields for Greater Western Sydney. Investors will continue to head west, lured by affordable property with high returns and higher stock levels.
What are the opportunities for buyers to keep an eye out for in 2012?
Angus Raine: Sydney has a growing shortfall of around 130,000 homes and this will create opportunities for cashed-up investors. There were also more overseas arrivals in 2011, which is set to push out the gap between the demand for, and supply of Sydney homes. As a consequence, with rental vacancies in Sydney just above 1%, it’s fair to expect rents to accelerate by as much as 5% for houses, while apartments will be about 8% more expensive by the end of 2012.
Janusz Hooker: Home owners will start the year feeling the benefits from 2011 cuts to interest rates and we see this and potential future cuts attracting buyers who wish to take advantage of currently well-priced property.
Douglas Driscoll: Off-the-plan sales are already at a high due to the wave of savvy overseas investors. Often entire developments are purchased off the plan quickly and that’s where local buyers are missing out. Investors overseas know it’s a safer investment here and are also comfortable buying off the plan. Often, by the time a development is completed these investors have made tens of thousands of dollars on their purchase price.
Local investors will change their mentality and realise that off the plan is the way of the future. Developments also offer warranties, making the investments as safe as a second-hand property. The challenge is for local buyers to get in there before overseas investors snap up future developments.
More specifically, which key suburbs do you predict growth for in 2012?
Angus Raine: Price, price, price will drive the buying decisions of investors considering homes below $650,000 in 2012, and this is why traditional apartment markets, where investors compete with first home buyers will produce healthy returns for owners. With this in mind, suburbs such as Eastwood, Ashfield/Burwood, San Souci and Dee Why, should enjoy a robust 2012.
Janusz Hooker: NSW was the best performing state regarding house prices in 2011. We expect to see this underlying fundament continue in 2012. Places to watch are Carrington and Wickham 3kms from Newcastle CBD (offering 6% yield) ; Muswellbrook (offering 6% yield) and Maitland in Hunter Valley are locations with lots of activity around the continued mining boom. There are also opportunities within the greater metropolitan area of Sydney.
Douglas Driscoll: The Ponds (west of Kellyville) is seeing high quality housing development on a large scale, and is tipped to be an upmarket area. Further, in Schofields and Riverstone a significant amount of land has been released with quality developments; a major part of the M2 is being widened to three lanes; and a planned Woolworths in Schofields is pointing to the growth of these suburbs.
Oran Park and Edmondson Park are large new suburbs. Edmondson Park is conveniently at the junction of the M7 and M5 corridors and will have a new train station linked to the airport and East Hills lines by 2016. In addition, my belief is that the north-west rail link will have to happen, further benefitting these areas.
Pemulwuy is a new suburb that has seen significant sales. 2010 saw an 11.5% increase in the median house price, and 2011 a 5.6% increase. In October, median house prices were 8% higher than the median house price for the Holroyd area.