What's happening to Sydneys Eastern Suburbs property prices?
At BuyEast we are focused on a micro property economy that does not follow the rules of the rest of Australia. Most of Australia has seen either a moderate growth, or even a downturn in property prices in 2015. Sydney has broken these rules with a significant price rise (value increase of 12.8% Source - RP Data). Sydney East has on average trumped this increase. Randwick council saw an increase on median house prices of 15.6%, Woollahra council 10.9%, and Waverley council a whopping 16.4% (2015 vs 2014, Source RP Data). Averaging an Eastern Suburbs growth of over 14%.
The first question is why does "The East" break the rules? As an East resident we would like to think its because we have the best beaches, weather and of course the nicest people. Our personal theory is that it is more to do with one main factor, that is the basis of most economic pricing, “Supply and Demand”.
Woollahra, Waverley and Randwick councils have been very good at limiting the subdivision’s and developments of their constituents. They have also done a fantastic job of keeping up the exclusive atmosphere of their suburbs. They have not done anything to limit the desirability of living in the area or done enough to accommodate for population growth. Don’t get me wrong, its not that they should have, but as more generations of Eastern Suburbs kids want to move out of mum and dads home and live in their own place in the East, they need more properties to live in. To compound this, there is the influx of overseas money buying up premium homes and the move of other Sydneysiders to the east. All these factors combined have pushed up desirability or “demand” for the East disproportionately to the rest of Sydney & Australia.
So two questions come to light. 1. How do we even out the lack of supply issues? And 2. What is going to happen with East prices in the short, medium and long term?
Firstly, lets look at supply. Our soon to be amalgamated councils (which should result in a more cohesive and uniform planning for the area) need to increase the supply of houses to the East. It is a necessary evil. All cities that grow must increase density. To do this, in a considered manor, we need to consider both the high end and low end for density increase, units/apartments, town houses, semi's and houses. At the moment most density increases focuses on multiple apartment blocks in the same street or area. This will not give an even spread. Councils need to look at the opportunity for allowing subdivision in the estate size properties and not just create hot-spots of density. Hot spots of density create poor infrastructure spread and uneven spread of desirability. Currently it seems that council picks three or four neighboring streets to offer high FSR (floor to space ratio) in an area. Should council choose to plan this better they could look at current land size, merging transport links and then spread the population load evenly. If you took a 2000m2 Vaucluse or Bellevue Hill block and made 5 x 400m2 blocks you would still have decent land sizes for a family home with 4-5 bedrooms and a yard, in a premium area while significantly increasing the density. This should only be done to one or 2 blocks in the street otherwise you will create a decrease in desirability. Council could even allow a couple of apartment blocks on streets currently only zoned for housing. This helps with car parking issues, load for power, water, sewerage, park etc…. Heavens forbid, maybe even consider a new apartment tower somewhere besides Bondi Junction.
Now I shall get off my soap box and give a bit of a prediction on point 2. Easts pricing….Visit any open for inspection prior to the doors opening over, and you will see a queue of people waiting to “get in”. Demand is huge and supply is low. Media fear mongering has told us for months that there is an economic downturn and property prices are going down, so less people are listing their properties for sale. This means everyone looking to purchase are fighting for what is available. This make prices go up. After speaking with numerous agents of the East this is not changing any time soon. Australia very rarely has any internal forces that shift our economy. We are economic sheep, if there is an issue in China, Europe or the US economies then we may have a charge coming our way. If things stay the same in the world economies, then we are heading for another year of strong growth in Sydney Eastern suburbs. I can only foresee prices continuing to rise for at least another year.