Australian policymakers say efforts to rein in the runaway housing market are working. But on the ground there’s a fresh bidding frenzy, as fibro shacks fit for demolition and miles from downtown Sydney go for almost $1m.
A lack of houses in and around the city, the epicentre of Australia’s property boom, is pushing up prices again even after banks last year tightened mortgage lending. Some buyers are snapping up homes they’ve never seen, worried it might be their last chance to own a patch of land, said Peter Baldwin, the chief auctioneer at real estate agency Richardson & Wrench for 27 years.
“It’s all guns blazing again,” said Baldwin, who’s never seen fewer properties for sale in spring, a season when home hunters are usually spoiled for choice. The shortage “will just keep this market humming along.’’
A three-year surge in Australian home prices paused at the end of 2015 after banks raised mortgage rates to offset the cost of holding more capital. The market is taking off again as a growing population tries to squeeze into too few properties, posing a potential headache for new Reserve Bank of Australia (RBA
) Governor Philip Lowe
House prices in Sydney are up 14% this year through September, compared with 9% across the nation’s major cities according to CoreLogic
, defying an assessment by real-estate listing firm Domain last year that the boom was over. Dwelling values in Sydney have now almost doubled since the end of 2008.
Fewer than 20,000 dwellings are for sale across Sydney, less than half the number listed five years ago, CoreLogic says. The costs associated with selling a property and buying another, such as agent commissions and government taxes, climb with the value of the home. That’s discouraging ever more homeowners from moving, CoreLogic said.
At a sale last week, auctioneer Baldwin took 134 bids for a drab, two-bedder in Greenacre, 18 kilometres west of Sydney, before dropping the hammer at $926,000. That’s 19% more than the median price for that size of property. Baldwin said the main draw wasn’t even the house; it was the chance to knock it down and build anew. Some buyers are saying: ‘we’d better get in or we’ll never get in,’ he said.
Sydney’s population will jump 50% from 2011 levels to 6.42 million in 2036, the New South Wales government said last month, lifting forecasts made only two years ago. It will need another 726,000 homes between 2016 and 2036, it said.
The nation’s largest city needs a “dramatic increase in affordable land supply” after residential land releases fell in 2015, according to this year’s State of the Land Report by the Urban Development Institute of Australia.
The report described Sydney’s housing shortfall as “chronic” and said there’s little prospect of fulfilling the city’s accommodation needs.
For would-be apartment buyers, at least, the supply crisis is set to ease over the next two years, as a flood of new developments spring up in eastern cities such as Sydney and Melbourne. A record 68,390 homes, most of them apartments, will be under construction this year in New South Wales -- double the pace from 2012, according to the Housing Industry Association.
Lowe, who succeeded Glenn Stevens
last month, noted this week that home-loan standards had improved and some lenders were being more cautious. But he homed in on supply issues, saying that fewer properties were changing hands and “some markets have strengthened recently.”
“The RBA is clearly concerned,” said Felicity Emmett, head of Australian economics at ANZ
. “There clearly seems to be a strengthening in the housing market. It’s something that really bears quite close watching.”
There’s competition at every price point. There aren’t enough $5 million houses or $20 million-plus mansions either, said Ken Jacobs, whose luxury property agency is an affiliate of Christie’s International Real Estate.
“There’s more inquiry than actual properties available,” said Jacobs, who’s selling Oscar-winning actress Cate Blanchett’s trophy home in the Sydney suburb of Hunters Hill.
That gives some on the property ladder a chance to cash in. In Woolooware, a suburb set back from the ocean about 30 kilometres south of Sydney, one homeowner turned a garage at the back of the house into a new three-bedroom villa and sectioned it off. Last month it fetched a reported $1.6 million, 43% more than the neighbourhood’s median selling price.
“Supply has been very low,’’ said David Smith, director of sales for Highland Property Agents, which marketed the Woolooware home. “Bigger prices have been achieved because there’s been less stock available.’’