Sydney property has been making media headlines a lot over 2019.
Repeated interest rate cuts, changes to lending requirements, property prices being scrutinised as they go down or up, auction clearance rates or stock levels – they all got significant airtime this year.
Here’s our take on how 2019 unfolded for real estate in Sydney’s eastern suburbs and the key factors at play this year.
A year of two halves
Sydney’s property market in 2019 was a tale of two halves. The first six months of the year, were cautious, restrained, and quiet. Calendar events played a role in this: Sydney’s property market rarely wakes up properly until end of February or March. However, in 2019 the timing of Easter meant it was right up against Anzac Day, so people went on holiday and the market had another pause. Then there was the election campaign at the end of May, which led into the long weekend and July school holidays. This meant we didn’t get a prolonged series of uninterrupted weekends until August.
Still, that is only part of the story. There is no escaping that Sydney’s property market at the beginning of 2019 was characterised by fewer-than-normal listings and low buyer and seller confidence. This translated into poorer results across the industry, with low auction clearance rates and falling prices – particularly in some market segments.
The 2019 federal election was a turning point
In many ways, it was the May federal election that proved to be the property market’s pivotal moment this year. A lot of the buyer and seller uncertainty was driven by the likelihood of a Shorten-led Labor government taking office. The ALP was the clear leader in almost every poll prior to the election and had a stated policy of abolishing both negative gearing and the capital gains tax (CGT) discount. This was causing anxiety (whether unfounded or not) about both property prices and the economy more broadly.
When the Morrison government was returned there was almost immediately a sense of greater optimism in the market and better results soon followed. After all, the Liberal win meant things would continue as they were, providing reassurance to those who were holding back for fear of falling prices.
Other factors affecting the Sydney property market
But for all its importance, the election has been just one chapter in the Sydney property market story. Economic factors have also played a major role in people’s thinking, as have tighter lending conditions. Banks self-regulated in the light of the Royal Commission, effectively reducing people’s borrowing capacities so they had less money to spend.
In the past few months, APRA’s relaxing of lending requirements and a series of interest rate cuts have created new market conditions. A new confidence has entered the market at every level and we’re seeing people anxious to make stronger offers for fear of missing out.
2019 was quieter at the top
At the prestige end of the market, sales have been down in 2019 compared to 2018. Prices over $20 million have been few and far between and no Sydney property fetched more than $30 million until the second half of 2019.
Our $23 million plus sale of 20B Tivoli Ave, Rose Bay, in February 2019 was one of the highest sales of the year – at least until September when the market started coming back to life once more. We are now seeing better signs in Sydney’s ultra-prestige market with greater buyer interest and bigger listings coming to market. We expect this trend to continue into 2020.
A spring in the step of the Sydney property market
Over the 25 years I’ve worked in the eastern suburbs property market I’ve witnessed my fair share of ups and downs. There’s no denying that the falling prices we experienced from mid-2017 were some of the poorest conditions I’ve seen (although they never got as bad as the GFC).
However, I’ve also never seen the market bounce back as quickly as it has in the second half of this year.
The figures back this observation up. Domain’s September House Price Report revealed that The City and East region experienced a 1.4% quarter-on-quarter market rise. Sydney’s median house price rose 4.8% over the September quarter to stand at $1,079,491. This increase is 400% bigger than the next strongest quarterly rebound of 1.2% which occurred in 1994.
According to Corelogic, Sydney’s auction clearance also increased to 74.6% across the September quarter – the best since June 2017. The clearance rate in Sydney’s eastern suburbs sat even higher at 86% by mid-October.
What we’re seeing now at open homes
The eastern suburbs market is, was and always has been highly sought after. This meant we were still seeing some activity even in the worst of the market – especially from downsizers but also from canny upsizers looking to capitalise on softer market conditions. Because a slow market almost always favours people looking to take the next step up, we saw some terrific buying over this period which will set some people up for life.
As 2019 draws to a close, we’re also seeing first home buyers are starting to come back. Property prices may be coming back to 2017 levels but record low interest rates make it easier than ever to service a loan – so long, of course, as you can keep your job. The main challenge for first home buyers right now is often not paying the mortgage but getting a deposit together.
We are also starting to see some investors slowly re-enter the market. Rents still aren’t great, but borrowing money is easier than it was and Eastern Suburbs apartments have been one of the good news stories for 2019 for capital growth.
Many people believe that we’ve seen the bottom of the market and that 2020 will be a year of strong capital growth. SQM boldly forecast that Sydney property prices will rise by 10%-14% if interest rates stay and current levels and by 11% to 16% if we see another rate cut.
We’re not quite that ambitious. After all, unemployment could grow or economic factors could deteriorate. However, it has been a strong end to 2019 and we’re genuinely excited by the return to positivity in the market.
We expect to see healthy competition, strong auction clearance rates and market optimism continue to put upward pressure on Eastern Suburbs property prices until well into next year.
Key sales for 2019
147 Queen Street, Woollahra
Offered in original condition for the first time in 50 years, this sale presented an amazing opportunity for the purchaser to reinvent an iconic home in a dress circle location.
38-40 Station Street, Newtown
Without a doubt the most unique property we have sold this year. This converted masonic hall has one of a kind historical features and yet a flexible layout. It’s no wonder this truly special and unique property received an amazing level of editorial coverage and great traffic through open home inspections.
20b Tivoli Avenue, Rose Bay
This is our highest recorded sale price for 2019, and with world class views and direct access to the world’s best harbour it’s easy to see why this was a highlight.
11 Thorne Street, Edgecliff
This 3 bedroom home near Trumper Park is in the highly coveted Woollahra Public School catchment area. It was notable as the first property where we saw increased confidence in the sub 3 million market – and this confidence continues today.
9/68 Plowman Street, North Bondi
This 1 bedroom plus sunroom top floor flat presented a great entry into the market or a solid investment. At $738,000 this was the cheapest property we sold this year. But the fact that we issued over 50 contracts shows how popular it was with buyers in North Bondi looking for units.
Sydney’s Eastern Suburbs Market Snapshot
A detailed annual assessment of the property market focusing on the Eastern Suburbs of Sydney, Australia.