How Sydneysiders are selling property and what that means for you
Property sits atop the pyramid when it comes to financial investment. No matter what you're buying for, either owner-occupied or as a rental, short of buying a fleet of custom-built Rolls-Royce's, you'll likely never spend more than you will on a home.
When it comes to spending such large amounts of money, it would pay to have expert advice available, right? Especially when the price of Sydney property is being driven upward because of how people are selling.
A new breed of selling strategies
In a mature market such as property, people are always going to be looking for different ways to get ahead and stand out from the crowd. In the case of Frenchs Forest, one of Sydney's northern suburbs, 62 homeowners are joining together in a bid to earn more for their homes than otherwise would have been possible.
Some of the properties will likely be more than doubling their projected selling totals.
The group are looking to get more than $3 million for each of their houses, which puts the total price tag up for the suburb around the $200 million mark. The median house price in Frenchs Forest according to Domain Group is $1.35 million, so for some of the properties they will likely be more than doubling their projected selling totals.
The idea of banding together when selling means that pitching to property investment groups that would be looking to develop larger projects are in the mix of buyers. Where selling individually would really only be marketing to people wanting a house, or a smaller block of land, selling to developers is more likely to fetch a larger price.
"That will provide developers flexibility with a master plan," said Matthew Ramsay, CBRE Sydney's director of residential developments.
When the idea came to some of the members of the group, they expected only a small number of people to be interested. But at the first meeting, the numbers exceeded expectations and only grew from then.
"We realised the bigger we got, the better it would be for us," said David Tomlinson, one of the homeowners in the group.
Of significance to the site is its proximity to the new hospital in the area, and the New South Wales government has singled it out as a significant site. In terms of the money being split between all 62 homeowners, it was expected to be divided evenly based on a square-metre basis. While some people in the suburb are choosing not to be involved in the mass sale, they are on the fringes and will not affect the rezoning of the site.
For people looking to purchase land on a smaller scale for an investment, it might pay to think about the potential for resale and how you could make the most of the capital gains. If you're looking for advice, enlist the help of a buyer's agent who knows the market better than most and will be able to help with an investment plan that will be the best for you.
The median house price of a suburb as well as the projected annual growth of the area will be key indicators for how well a property will grow in terms of adding value to your portfolio. The median house price of the Sydney suburb of Zetland, for example, is $1,600,000. To make the investment more viable, the median annual growth over a three-year period is predicted to be 93.41 per cent as stated by Smart Property Investment, and that will only decrease to 70.21 per cent over a five-year timeframe.
With a relatively high median house price already and an astronomical growth projection, all of the arrows are pointing towards capital gains and thus a valuable investment property in Zetland. There are similar numbers all over Sydney, and as more and more people move towards the option of joining a larger consortium in order to sell their land, it may just pay to keep that in mind when deciding on a house.
The successes of the northern beaches
From a similar area to Frenchs Forest, properties north of the Spit Bridge on Sydney's northern beaches are increasing in value and moving away from the trend seen in most of Sydney at the moment.
Domain Group found in its House Price Report for the December Quarter of 2015 that the median house price in Sydney fell by 3.1 per cent – the first drop since June 2012. While the median house price still sits above the $1 million mark, that drop does not necessarily mean a decline will continue. Northern beaches suburbs are predicted to buck that trend and grow by 3 per cent for the 2016 year, which shows how strong the market in the area is.
Clontarf is a forgotten gem in a sea of diamonds.
There are examples of significant returns around the northern beaches already, with Seaforth properties tending to move at around the $3 million mark. However, last year a property in the area was sold for $10 million by Mac Lee Realty, and that sets a strong tone for potential investments in the future.
Right next door to Seaforth is Clontarf, which Jason Guildea of Guildea Realty thinks is a forgotten gem in a sea of diamonds.
"I think it's just been forgotten in the last two years while the surrounding suburbs went crazy with investors and families buying in. The suburb has always had a prestigious name for itself but prices haven't changed much for the last seven years."
Adding to the value of these suburbs are planned developments, including the aforementioned hospital building as well as a $310 million facelift for Westfield Warringah Mall, which also includes an adjacent two-storey building, set to be home to 70 new retailers.
Why is this good news for investors?
A higher price for better living
When people look for investment properties, at the top of the list will be how accessible they are to nearby shops, amenities and the CBD. The northern beaches not only lie within 20 kilometres of the city but are also being developed upon, and that will drive prices up significantly.
While the median house prices might be higher than other suburbs in Sydney, there are likely to be higher returns on properties that are surrounded by not only useful amenities, but brand new ones. Domain Group Chief Economist Dr Andrew Wilson believes that the median house price in all of Sydney is going to decline for a number of months, which could leave the door open to investors looking to snag a bargain.
"The remarkable Sydney boom we've seen over the last three years is now clearly over, with the market unlikely to record any notable house prices growth until at least spring," he stated.
"While the median house price still remains above $1 million, if current trends continue it will likely fall below this benchmark by mid-year."
If Dr Wilson's predictions do eventuate, it could well see a huge demand for investment properties in the city. Low prices in a popular market are not likely to stick around for long, so cashing in while the timing is opportune could be a very shrewd move.
If you're after some advice about which suburbs would best suit your investment needs, talk to one of the expert buyer's agents from Cohen Handler and land yourself the right patch of property.