Downturn has made homes more affordable for 1st-time buyers and for renters
SYDNEY • Australia’s worst property slump in a generation has created some obvious losers. Investors who bought at the top of the market are underwater; homeowners looking to sell are having to slash prices and developers are struggling to offload apartments as projects started during the height of the boom near completion.
But there are also some winners, from first-time home buyers to stylists sprucing up dwellings to get them camera ready for sale. Here are five groups getting ahead despite the downturn:
The downturn has made homes more affordable for first-time buyers — usually younger people who feared they would never get on the property ladder as prices surged as much as 75% during a five-year boom that peaked in mid-2017.
The median dwelling value in Sydney fell to A$789,339 (RM2.28 million) in February, according to CoreLogic data, from as much as A$895,117 at the top of the boom.
With interest rates still near record lows, and lending curbs knocking investors out of the market, first-home buyers are back in business.
That’s showing up in lending data: The group accounted for 26.5% of mortgages taken out in December, up from 20% in February 2017.
“My hunch is it’s a pretty good time to buy,” said Stephen Koukoulas, the MD of Market Economics Pte Ltd and a former advisor to ex-Prime Minister Julia Gillard. “If you’ve got a secure job, a deposit and financing, then affordability is pretty favourable.”
More first-time buyers getting on the property ladder is thinning the field of applicants for rental properties, just as a wave of new supply hits the market.
Rent inflation, at 0.5%, is around the lowest since 1993, according to the Reserve Bank of Australia. In Sydney, median weekly house rents declined 1.8% in the December quarter from September, and apartment rents dropped 2.8%, according to property listing website Domain.
Landlords are dropping rents and in some instances offering incentives such as a free pizza and case of beer to applicants willing to sign on the spot.
“I wouldn’t say it’s a tenant’s market, but we are starting to see incentives being offered by landlords, like one week’s free rent,” said Leo Patterson Ross, senior policy officer with the Tenants’ Union of NSW, an advocacy group in the state of New South Wales. “Landlords know they can’t just sit back and have hundreds of applications thrown at them.”
The return of first-home buyers is supporting the bottom end of the property ladder.
The value of dwellings in the lowest 10% of the market rose in the 12 months through January, and was little changed in the next two bands.
By contrast, the top of the market is hurting the most: Prices for the most-expensive properties fell almost 10%.
While the two major cities that led Australia’s housing boom — Sydney and Melbourne — are now leading the retreat, home prices in smaller towns are holding up.
Hobart (population 220,000) was the only state capital where prices rose last month, and values are up 7.2% in the past year.
The Tasmanian city is benefitting from mainlanders cashing out and moving to the island state for a more relaxed lifestyle, and investors chasing capital growth in a tight market. Plus, the median house price there is a more affordable A$457,186.
In regional cities, prices are down just 0.8% in the three months through February, compared to a 3.3% decline in the combined capitals.
Those companies that whisk in, take the tired furniture out and magically make homes look lovely are also benefitting from the property downturn.
More than ever, there’s a realisation by vendors that homes must be at their most presentable in order to maximise the sale price and minimise the time spent on the market.
Furnish&Finish MD David McLean said a professionally styled property can shave about four weeks off a marketing campaign and add about 12.5% on average to the sale price. He recalls two identical studio apartments in North Sydney in the same unit block that were on the market recently: The styled one fetched A$100,000 more. Valiant Hire Pte Ltd is also in the residential styling business.
Co-founder Steve Remington said inquiries were up about 25% in the first month of this year versus a typical January.
“People who previously wouldn’t have considered going down the styling path are looking at it a lot harder now,” he said. “They know that in this market, they really need to present the property in the best possible light.” — Bloomberg