By any measure it’s an unusual and easily a historic week and circumstance we find ourselves in as we all confront the Coronavirus. This may well be a ‘black-swan’ event for the world and for our economy and that will include many questions concerning the housing and wider property market.
However, while it’s a little early to judge the possible impacts on the housing market I’m going to stick to normality and finish my overview of the apartment market. Having already looked at the Sydney’s CBD, Northern Beaches and Eastern suburbs and the North Shore, the Inner-West, Parramatta and Penrith it’s worth surmising ‘where to now’.
While each of the markets do look very different, they all share some common factors and central is the big shifts in demographics that are driving development and demand, that impact in different ways.
In the Sydney CBD and North Sydney CBDs there’s a huge mix of demographics and demand ranges across students to well-healed empty nesters. Then we have boutique focused neighbourhoods across many suburbs on the North Shore and East.
Then a new generation of apartment projects on large scale in areas like Penrith and Parramatta re attracting residents, including families who in the past may well have never be considered apartment living, let alone high-rise apartment living.
Demographic change is playing a big part in driving the North Shore, and this trend has also caused the re-development of older strata-projects and demand for site amalgamations of traditional homes on large blocks.
However, another key factor that’s now a characterise of many areas is a lack of supply, and as we see some industries slow down and building materials supply issues arise that further delay new homes and projects.
Then in almost every market and for the immediate future, limited supply will be made even more complex as apartment buyers look for locations that are well-serviced by transport and other key infrastructure.
The availability of infrastructure is also linked to employment and the growth in commercial developments which is already apparent in areas like Parramatta, Olympic Park, Macquarie Park and the Norwest and in particular North Sydney which some interesting figures in this video highlight.
And almost regardless of location residential markets are also driven by access to education, a variety of housing, sporting facilities, shopping centres, medical facilities and open space.
Where to Now
The markets I’ve outlined is not an exhaustive list, but they do go a long way to show the many aspects of the markets diversity, and how that diversity meets the needs of different buyers. That’s being further reflected in the maturity of the apartment market.
Each of the markets also delivers very different price points. In 2018-2019 prices were very stable and now that we are well into 2020 price growth while still cautious is on an up-wards trend. That trend should be expected to firm as supply stabilises and then falls away in late 2020-2021.
How Are Buyers Acting
One of the key factors that I’m always looking at across the market is the relative activity between three groups being first home buyers, investors and owner occupiers. These three trends show some notable results between 2014 and 2019.
In 2014-2017 investors accounted for more the 50% of sales peaking at 63% in 2015. However, activity had fallen to 33% in 2018 and even less at 25% in 2019. That’s a very big variation and points to the way that investors may have further ground to gain in 2020/21.
First home buyer trends, as might be expected went in an opposite pattern. Representing just 14% of sale in 2014 and even less falling to 7% in 2016. However, by 2019 that had increased, almost three-fold to 19% in 2019 and the trend continues.
Owner occupier figures were generally stead at between 32% and 37% over the period 2014 to 2017 but took big jumps in 2018 to 51% and 56% in 2019 and it appears that currently owners occupiers are still the most active group. Here, it’s reasonable to suggest that falling listings and future supply are creating more urgency.
These figures are drawn from Colliers own results, a solid indication of activity among new and established apartment buyers. Enquiry numbers and the pattern of conversions, one factor we have noted is the quality of buyers, they may be slower to act but they are better informed and usually ready to act, but only when they feel confident to do so. There’s some degrees of FOM (fear of missing out) creeping into the market.
But when buyers have done their homework, and they do so very diligently they go ahead, but there’s not a mad rush and quality is top of mind in terms of developer. Builder and location. We’ve also fund this is true among off-the-plan buyers.
Patterns of Activity
From a marketing perspective two interesting facts can be traced from a) the levels of buyer enquiries and b) actual sales, if we take 2018-2019 figures as a starting point is there a guide towards what the immediate future and next 12-months might deliver.
From at least one point of view the answer has to be yes. Over the period there was a procession of well-documented events that directly impacted the market. These were the Banking Royal Commission (BRC) and the credit restrictions that followed, high-profile construction problems with a number of buildings, the NSW state election and the Federal election.
Each event impacted the market, recovery was more marked and immediate after the BRC. However, when combined with the building issues and two elections there was a period of low activity that ran from August 2018 until September 2019, when the market appeared to breath a collective sigh and sales recovered. But, enquiry levels have remained below pre-BRC levels despite better sales results.
Supply Is Falling Fast
Supply of both new stock and established homes remains cautious, and new supply in particular continues to fall. The current woes surrounding the Coronavirus will add to building delays and this may well further dampen supply not to mention the impact on employment and economic activity.
We do however usually see a lag between a pick-up in enquiry numbers and eventual sales and so this may well point to even more critical pressures on supply when buyers actually determine to purchase.
As supply continues to fall-short there’s also a reasonable mid-term prospect that the rental market will tighten and rents increase. In that event investors may be a stronger element in the market as they chase returns from a less volatile property market.
However, the earlier figures comparing sales and enquiries appears to easily reinforce the reality that all buyers (especially investors) are well educated in the ins and outs of the residential market.
No Reasons for Blacklists
Trying to put all of these comments into a quick, reasonable market overview I’d have to say that no market should now be on any sort of black-list however, the quest for quality will not go away, and quality will mean different things to different buyers extending well beyond the build quality.