Ray White Residential Research

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Reseach
_Know How
Michael Lowdon Director
Ray White Residential Sydney CBD
Tel: 02 9249 3739 • Mobile 0400 203 640
Outlook
I believe the prices for city apartments will remain steady in 2016 keeping most if not all of the capital gains
last year.
Of course there will be exceptions but I believe that any future price rises throughout 2016 will be kept in check
by some cooling of market sentiment but more importantly the start of increasing supply. The current CBD 10
year average is 931 sales per annum, which are well below the 1312 apartments that are expected to enter the
market annually for the next five years starting now. Over the coming years Sydney CBD will begin to see the first
of many new developments such as the first phase of Barangaroo settle and this will be an acid test for the city.
In the past new developments such as The Hyde, The Residences and Stamford Residences have been settled
in isolation; by this I mean they have had several years between them with no competition. In my past experience
when new developments settle between 20% - 40% of the apartments come back to the market. These sales
fall into three categories including the tail end of developer stock, property speculators / investors and owners
whereby their own personal circumstances have changed. Even in isolation it has taken several years (three –
four) for these apartments to all clear.
Therefore the question is whether the market can cope with a multiple developments coming online at once
with even more developments being sold off plan at the same time. There appears to be some potential for
the developments in the pipeline to come under pressure in future years. This may mean some high profile
developments be put on the backburner.
The beginning of 2016 has been interesting; for capital growth 2015 was the most positive year in a decade for
Sydney CBD. In late 2015 auction clearance rates in NSW began to drop from record highs which left many
in the industry guessing as to what 2016 has in store. Early signs pointed to a more subdued year ahead with
clearance rates in January well down giving rise to more bearish sentiment but they have since bounced back.
The NSW auction clearance rate is just one indicator of the health of the market. Real estate agents in the city
as a rule do not auction property with the majority of transactions sold by private treaty; in some research I
carried out towards the end of 2015 I discovered out of 150 apartments listed only 5% were via auction which
is substantially lower than other Sydney suburbs and even then agents would aim to sell them prior to auction.
Therefore it is inappropriate to use the NSW clearance rate as a sole gauge for the health of the city. I imagine
if the clearance were to fall in the future the media could use this as evidence of a downturn. For the time being
at least “supply” will be the determining factor where the city market goes in 2016. The current position is there
is a lack of quality properties for sale meaning buyers are still having to compete for property and this will offer
opportunities for vendors.
Michael Lowdon Ray White Residential Sydney CBD
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