Let me explain the phenomenon of revenge travel. After enduring lockdowns that made international travel nearly impossible, swathes of people jumped into the travelling ring hard. But it’s coming to an end, and people are coming home in more ways than one.
While no one was actually tagging those European holiday photos #revengetravel, 2022 saw massive spikes in the number of people jetting off to see the world.
European airports experienced close to a 250 per cent increase in passenger volumes, according to data from ACI Europe. These “payback” trips came in all forms; from bucket list ‘go big or go home’ blowouts, to long overdue family reunions.
But here’s the thing about bucket list items. They run out. There’s a hole in that bucket now – the rising cost of living pressures, interest rate rises and mortgage stress bored its way through. As of September 8, the Aussie dollar was trading at 64 US cents. It may be good news for overseas buyers; not so much for anyone heading to Europe next week (that $40 espresso martini? Enjoy every last drop.)
The travel dollars are drying up and buyers are returning to bricks and mortar instead. Those lavish $60,000 holidays? Great memories, great snaps, no regrets – but normality is returning. Here’s what we’re seeing in the market.
Four months ago our Chief Economist, Nerida Conisbee predicted by August 2023 the market would return to the peaks of November 2021 where low interest rates, low supply and huge demand collided to drive the fastest pace of price growth in more than three decades. It was the peak of all peaks.
There’s no denying it, I remember the early 1990s like yesterday (but somehow still maintain a handicap of nine, thank you very much). Interest rates soared and as a result, the market crashed.
So, as Nerida revealed her prediction, I’ll admit, I found it hard to believe. I had my doubts, to say the least. I thought she must be the ultimate warped optimist.
But look what happened.
August was a record month from Ray White Lower North Shore Group for our residential offices. And as a whole brand across Australia and New Zealand, our combined sales at Ray White suggest that the market was just four per cent down on 2021 – a year that reset all sales records and has been described as a ‘statistical outlier’.
Sorry, Nerida.
So what drove the demand? The last quarter saw stock in extremely short supply but across the country in August we (Ray White Group) listed 10,500 properties – more than 20 per cent higher than two years ago. Buyers, including potential sellers, had a lot more property to choose from.
Looking ahead, we’re returning to a more level market with a view to replenish stock. Those who sold during August now have their sights set on repurchasing and are seeking more stock in October, November and December.
A significant portion of the market is being sustained by overseas money and while much has been reported on Chinese developers downsizing their Australian operations amid a worsening property crisis back home, we’re seeing steady streams of Australian-born Chinese investors purchasing properties as long-term structures in Australia, without viewing mainland China as the foundation.
The building industry is another sector that’s seen a massive upheaval – home building materials have increased by 7.4 per cent over the past 12 months, according to Master Builders Australia CEO Denita Wawn.
As a result, people who bought property in the past three to five years with the view to renovate or rebuild are now recoiling with quote shock. Time to market is also increasing, driven predominantly by labour shortages in the building industry. What was previously a 12 month wait for building is now 18-months, impacting both the market and owners financially. A reduction in new home construction is certainly pushing more into the established home market.
The upswing in the rental market isn’t news to anyone, but we’re now seeing it start to level off within the day-to-day trade in the market. Certainly, the growth in rents hasn’t ceased but it’s not as fierce as previously seen. What underpinned the growth? From an investor’s perspective, they were paying two per cent – they’re now paying six per cent. So, on a million dollar loan, that was $20,000 a year in interest and incoming rent was $25,000. Now it’s $60,000 and the hand must go in its own pocket to pay interest.
On the Lower North Shore we haven’t seen the mortgage cliff at this point. We don’t know whether we will or won’t, but certainly a significant number of buyers in the Lower North Shore have purchased properties with more equity than borrowings.
What will the spring months look like? We may not get back to the staggering levels of 2021 but with consistent stock, we will come close.
In the Lower North Shore, local buyers on the hunt for top-notch apartments in prime locations have ignited a whirlwind of excitement this quarter. The allure of downsizing into high-quality dwellings in convenient locales has spurred remarkable activity.
Developers have been astutely attuned to this burgeoning demand, ensuring buyer needs remain paramount in the design of new boutique projects. There’s an enduring hunger among residential Developers to secure new development sites in these highly coveted premium locations, reflecting the market’s vibrant dynamism.
Currently on the market;
While planning complexities have posed delays for several new residential apartments and townhouses in the area, we’re thrilled to announce that several freshly approved projects in Mosman, Cremorne, Neutral Bay, Crows Nest, and Willoughby will soon make their grand entrance into the market, promising even more excitement in the coming months. It’s an exhilarating time for luxury apartment enthusiasts on the Lower North Shore!
Across the Lower North Shore of Sydney, tenant preferences are evolving. There’s a growing demand for longer-term leases, reflecting a desire for security and peace of mind.
In the last quarter, we’ve noticed an increase in couples and new families seeking affordable housing options, leading to a dip in demand for higher-end properties, particularly three-bedroom homes.
The Lower North Shore of Sydney, with its leafy streets and an array of boutiques, remains an attractive and trendy destination for tenants.
Despite predictions of a scorching summer, there’s a silver lining – a significant reduction in mould complaints for the first time in years, bringing relief to both tenants and property owners.
This quarter presented unique challenges with lower-than-average sales interest. Meanwhile, in the leasing sector, we observed a notable surge in enquiries from beauty services, overshadowing other retail uses. Unfortunately, the office usage market remained relatively stagnant.
Leasing processes extended beyond the typical time frames, accompanied by a decrease in the quality of inquiries from prospective tenants.
On a brighter note, anticipate an exciting addition to Fitzroy Street, Kirribilli in the upcoming months. Stay tuned for more updates on this promising development.
Over the last quarter, the mortgage market on the Lower North Shore experienced a shift as the removal of refinancing offers and cashbacks led to a decline in enquiries.
Borrowers felt the impact as fixed rates rose from 2% to 5% and beyond. However, there is a glimmer of optimism on the horizon with the RBA’s gradual rate increase slowing down and a change in leadership as the Chairman of the RBA retires. This transition is hoped to boost confidence and usher in a new vision for the market.
As the market normalises, we’re committed to offering our clients more time and an enhanced, comprehensive service. We look forward to this opportunity to better serve and assist our valued clients.
The Mosman office, serving Mosman, Cremorne, Neutral Bay, Cremorne Point and Kurraba Point, has witnessed a dynamic and resilient property market, surpassing predictions. Price sensitivity continues to be pivotal. Our expertise in property pricing has been vital in connecting with buyers and ensuring successful campaigns.
While property availability has grown, stock remains relatively tight. In the last quarter, property listings in our covered suburbs surged by 34% compared to the previous quarter, reflecting an evolving market. Buyers, now more discerning, wait for signs of interest from others, benefiting from a wider range of options.
The thriving downsizing market seeks quality apartments with convenience, exemplified by the successful sale of 2/39 – 41 Middle Head Road, Mosman. Luxury apartments and signature houses have exhibited exceptional strength, with the sale of 3+ bedroom apartments in Mosman alone growing by an impressive 60% in the last quarter, compared to the previous quarter. The two and three-bedroom apartment markets have shown resilience, with increasing appeal to discerning buyers. The stretch from near Taronga Zoo to Mosman village has become a sought-after hotspot, with robust family home transactions. This vibrant landscape proves the market has surprises in store.
*Data from realestate.com.au (listings report)
In the third quarter of 2023, Cammeray’s real estate market experienced a notable transformation. As interest rates fluctuated, many homeowners chose to remain on the sidelines, while investors took the lead in apartment sales. The numbers tell the story: 6 houses and 33 apartments changed hands, compared to 17 houses and 28 apartments in 2022.
Market stability is gradually returning, offering reassurance to both buyers and sellers. The interplay between supply and demand continues to be a pivotal driver, with a limited housing supply driven by domestic and migration factors. Media and agent reporting, alongside fluctuating price guides, have prompted more cautious buyer behaviour, leading to a decline in clearance rates from 80% to 65%.
In this quarter’s review, it’s been both surprising and heartening to witness the market’s resilience despite higher interest rates, mounting household expenditures, and a reduced borrowing capacity. This resilience underscores the unwavering demand within the Lower North Shore market.
While first-time homebuyers encounter challenges in entering the market due to mortgage pressures, asset-rich downsizers are capitalising on their lucrative house sales and seeking to acquire both a city residence and a regional retreat.
We’re also noticing a growing number of investors divesting their investment properties, while ageing homeowners are exploring downsizing options to reduce their housing footprint.
Families who made purchases in the last five years are holding on, weathering the impact of rising interest rates, unwilling to settle for minimal gains compared to their purchase prices several years ago.
North Sydney houses are currently in high demand. The ongoing urban redevelopment of the CBD is fundamentally enhancing the suburb’s liveability.
Local agents in and around Willoughby, including Castlecrag, Northbridge and Naremburn, have shifted their focus away from off-market sales, instead bringing a multitude of properties to the market. This strategy is bolstering volume and attracting a larger pool of buyers, consequently intensifying market competition.
In our areas, four-bedroom homes with two bathrooms, two living areas, and an open-plan design, particularly within the $4 million to $5.5 million range, are thriving.
We’ve observed a notable surge in enquiries for unrenovated properties, appealing to buyers looking to personalise their new homes.
Foreign investment is significantly contributing to premium prices, with Californian bungalows and Federation homes, offering ample value-adding opportunities, performing exceptionally well.
The overall real estate market in the suburbs we operate in remains robust, with a surplus of available properties. Remarkably, despite earlier forecasts and higher interest rates, the median house sale price this quarter stands at $3.4 million, surpassing the previous market peak in 2021, which had a full-year median of approximately $3.35 million. This area’s real estate market continues to demonstrate its strength and resilience.
If you would like any advice on the market, please get in touch with our team. We’re here to help.
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