Market Review Winter 2010

8/9/2019 Market Review Winter 2010

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JOHN McGRATH’SMARKET REVIEW

WINTER2010



We saw strong price growth in the rst quarterof 2010 in most major ci es and I predict thiswill con nue through the Winter season. There’sbeen some specula on that the property marketwill be impacted by rising interest rates, andwhile it’s likely that price growth may slow byChristmas, we won’t see any correc on in values.Supply will remain low for several years so Ibelieve we’ll see ongoing annual price growth of around 6%-8% once this surge in prices subsides.We’re at the beginning of a 3-5 year growth cycleand I believe buyers will look back and wish theyhad bought in 2010.

Market Observa onsHere are a few of my key observa ons and viewson the current market.• Clearance rates have been consistently high,

around 70% na onally – as strong as I’ve seenthem in many years. New lis ngs are selling quickly as demand con nues to markedly outstripsupply in most major ci es, with the sub $2M price range par cularly buoyant.

• Tradi onally, Winter provides buyers a new opportunity as demand can temporarily subside anddays on market can lengthen. I expect Spring 2010 will see a signi cant increase in economic andbuyer con dence as the US recovery con nues and Australia’s best proper es hit the market in ourtradi onal peak season.

• While most analysts are saying buyer demand will drop o with each rate rise, many buyers intoday’s market have been ac vely looking for many months and don’t want to miss out. Buyersremain con dent that price growth will con nue to rise over the next 12 months. I believe demandwill remain extremely strong while home loans remain under 8%. However, buyers shouldn’t getcarried away and over-commit.

• Upgrader buyers are dominant in our major markets although new AFG* gures show almost 40% of loans drawn in April were to investors – the highest number AFG Mortgage Index has ever recorded.Broadly speaking, the $500,000 to $1.5M market is the strongest bracket and it’s interes ng to seeinvestors at the upper end of this bracket instead of the tradi onal sub $500,000.

• There is s ll an opportunity for rst home buyers to enter the market despite the recent rate rises.However they should factor in the possibility of further rises, even though I think they’re close totheir peak. There’s s ll great buying available but I’d advise FHBs to do more research, be prudentand shop around for mortgages as well as proper es to get the best package.

• The pres ge market remains somewhat untested with most ac vity under $3M right now. We’veseen a few outstanding sales above $5M but supply and ac vity is generally low. Increasing execu vebonuses will create more demand and accompanying price growth will follow. For those buyers thathave been holding o , I see the next 3-4 months will present some great value opportuni es.

• Rents are strong due to low supply and less buying ac vity among rst home buyers. Rents are up 30%over the past few years in all major ci es. There is a several-year lag between development approvaland availability for sale, so this will keep new supply low and demand high for some me to come.

• Canberra is booming with demand outstripping supply even in the apartment market, wherewe’ve seen a signi cant increase in stock. This can some mes so en prices but not so in Canberra – for the rst me in history, apartment sales now outnumber houses and prices are very strong.

*Australia’s largest mortgage aggregator

John McGrath’s Market Review - Winter 2010 1



John McGrath’s Top Metro Suburb Picks – Best Buying for Future Growth

Houses• Bronte• Pyrmont• Neutral Bay• Hunters Hill• Mosman

• Balmain East• Avalon• Northbridge• North Parrama a• St Ives

Regional MarketsAs we expand into other lifestyle markets on the eastern seaboard, we are ge ng access to moretrends and insights into new markets. Here is what we are seeing.• Enquiry from metro-based empty-nesters remains strong. Local and Sydney-based investors are

gradually returning to the sub $500,000 bracket in coastal regional areas.• The market for houses and apartments under $500,000 is s ll very strong. Unlike other parts of the

country, rst home buyers are s ll very ac ve due to great local a ordability in such areas as theCentral Coast and Wollongong.

• Many ac ve buyers are Sydney execu ves looking for a lifestyle change that allows them to workfrom home part- me with a quick commute to their Sydney o ces.

• The Southern Highlands, Central Coast and Blue Mountains have experienced an oversupply of premium proper es during the GFC as many holiday homeowners liquidated their assets, so thesemarkets are presen ng some great buying opportuni es.

• The luxury upper end of the Ballina/Byron market was signi cantly a ected by the GFC, with someexcellent buying opportuni es above $1M. It’s rare for such a blue-ribbon area to experience thiskind of price fall, however I suspect the recovery will be fast and furious.

John McGrath’s Top Regional Picks – Best Buying Opportunites

• E along Beach• Thirroul• Burradoo• Byron Bay• East Ballina• Kingscli • Avoca Beach• Belmont• Nelson Bay• Tweed Heads

John McGrath’s Market Review - Winter 2010 2

Apartments• Darling Point

• McMahons Point

• Lane Cove West• Tamarama• Ramsgate• Northbridge• Balmain• Chippendale• Rozelle• Kirribilli


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JOHN McGRATHChief Execu veMcGrath Estate Agents

mcgrath.com.au

johnmcgrathblog.com.au

For media enquiries, please contact Terri Sissian:T 9386 3342 or 0419 881 414E [email protected]

Key Points & Predic ons• Con nuing strong price growth in major metro markets in Winter and Spring.• No correc on coming but slower pace of price growth inevitable in 2011.

• Main market strength is in inner city metro loca ons, many regional areas yet to fully recover.• The seasonal in uence of Winter provides a new opportunity in metro areas with demand

subsiding.• Upgraders are dominant but the propor on of investors in metro markets has increased

substan ally.• Buying opportuni es s ll available for rst home buyers but they must do their research.• Pres ge market above $5M remains largely untested.

Market Review Winter 2010

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