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Property investment in Sydney, Australia: A breakdown of trends, prices and the market in the land Down Under

From coastal mansions to trendy towers, sun-drenched Sydney offers an array of lifestyle options, but will prices hold?

Feb 28, 2017 | By Sophie Kalkreuth

Defined just as much by its rugged Pacific coastline as its exquisite harbour, Sydney is Australia’s most glamorous city. It is also the most expensive. Since house prices began to rebound in mid-2012, the city’s residential values have surged 67%. Despite talk of the market cooling, price growth has continued. The city’s runaway house prices increased again in November 2016, taking their annual price growth to 13%, according to researcher CoreLogic.

The trend has some warning of a looming price correction. “All the signs of a bubble are there”, David Murray, former Commonwealth Bank CEO said in a recent TV interview where he pointed to overvalued house prices in Sydney and Melbourne. “We believe Sydney is up to 40% overvalued”, agrees Louis Christopher of SQM Research, a boutique property analysis firm. If changes aren’t made, such as lifting interest rates or tougher restrictions on lending Christopher says prices could continue to rise up to 16% in 2017.

However, not everyone concurs with this assessment. The Reserve Bank of Australia has doubled down on its claim that house prices are under control despite the recent rises in Sydney and Melbourne. On average across Australia, the RBA says that “house price inflation” is still below mid-last year when regulators stepped in and forced banks to tighten credit standards.

“My thoughts are that analysts are continuing to get the Australian market wrong”, says Ken Jacobs, a broker who specialises in the sale of luxury homes in Sydney. “There is not one market, but rather multiple markets, and when researchers lump information together it distorts the facts”.

Mr. Jacobs says he is currently seeing the most sales activity in the lower end of the market (below AUD 2 million or approx. USD 1.5 million) and in the new-build apartment market, although a glut of new stock in the pipeline could take some heat out of that sector. Meanwhile, sales at the high-end of the market are solid if somewhat subdued, although, he says, “there have been a couple of high value sales that have helped to recalibrate the top end”.

At one such sale a Sydney family spent AUD 57 million (approx. USD 42.7 million) on harbourside real estate, picking up three homes in the upcoming Opera Residences development, including an AUD 26 million (approx. USD 19.5 million) penthouse and two sub-penthouses priced at AUD 14.9 million (approx. USD 11.2 million) and AUD 16 million (approx. USD 12 million). Located in Bennelong Point, one of the city’s most tightly held enclaves, the Opera Residences includes 104 units, many with stunning views of the Opera House, bridge and harbour. Prices start at around AUD 1.66 million (approx. USD 1.25 million) for a one-bedroom unit.

When it comes to detached homes, Sydney’s most exclusive neighborhoods are Eastern Suburbs like Point Piper, Elizabeth Bay, Mosman, and Hunters Hill on the North Shore, where mansions often sell for upwards of AUD 13.3 million (approx. USD 10 million). The majority of buyers here are purchasing a primary residence. And while Jacobs has sold several trophy homes to Chinese buyers (a Point Piper mansion recently sold for more than AUD 60 million or approx. USD 45 million, to a billionaire family from China), generally he says overseas buyers are most active in the new-build market. (The Australian foreign Investment Review Board allows 50% of any new development to be sold to non-residents).

Historically, condos in the Central Business District (CBD) have sold well, but development is now shifting to new neighbourhoods like Waterloo and Eastlakes, which offer easy access to the airport, the southern beaches and the University of New South Wales. Parramatta has also benefited from government investment in infrastructure and an influx of young professionals.

“Parramatta’s population is forecast to grow 24% by 2036”, says Julian Sedgwick, Global Head of Sales and Marketing at Crown Group, one of Sydney’s most prolific developers. “Dozens of high-profile companies are shifting their workforces to Parramatta and bringing executive-level jobs traditionally located in the CBD”. Executives don’t want to settle for average apartments, Sedgwick says, and as a result there is a growing demand for high-quality apartments with resort-style facilities. His company is currently developing Infinity, a mixed-use condominium development in Parramatta that comes complete with landscaped rooftop gardens, secluded entertainment areas and a sky lounge.

Iwan Sunito, founder of Crown Group has been developing projects in Sydney since the late 1990s. He believes that location remains the most crucial factor for buyers, and all of his projects are situated nearby public transportation, shopping centres, offices and schools. However, he says, increasingly buyers are also focused on a project’s economic sustainability, by which he means “simple, innovative and functional design”.

“We pay particular attention to natural light and public space while designing. We also put significant consideration into how to benefit the public and address the future needs of the area”, he says. The Infinity, for example, features a looped shape with a void in the north-facing façade that will allow natural light to penetrate a central landscaped plaza and apartment balconies. At street level, a variety of cafes, bars, restaurants and retail options will wrap the perimeter of the building.

New developments in emerging neighborhoods will no doubt continue to redefine Sydney’s urban lifestyle. Julian Sedgwick believes the city’s strong fundamentals will remain attractive to buyers. “Sydney offers a safe investment for buyers with strong infrastructure, steady residential price growth, strong employment and, most of all, political stability”, he says.

Looking ahead, Shane Oliver, chief economist of AMP Capital predicts prices in Sydney will rise by around 10% in 2017. “Nationwide price falls are unlikely until the RBA starts to raise interest rates again and this is unlikely before 2018”, he says. Ken Jacobs agrees. “Unless there is a specific issue or event that spooks the market, I think 2017 will be relatively steady growth-wise”.

On the Market

Bulwarra, Hunter’s Hill

Originally built in 1877, this riverside estate has been refurbished as a contemporary, eco-friendly retreat. The property includes five bedrooms and four bathrooms across 6,689 sq. ft. of indoor and outdoor living space and features dramatic double- height ceilings, oak floors, a pool pavilion, tennis court, guesthouse and four-car garage. Located in Hunters Hill, nine kilometres from Sydney’s CBD.

PRICE: On Application, CONTACT:

Infinity, Green Square

Designed by architect Koichi Takada, this upcoming 20-storey mixed-use development includes studios to three- bedroom apartments and garden terrace units, each with floor-to-ceiling glass. Amenities include landscaped roof gardens, a sky lounge, an infinity pool and a performance auditorium. Located at Green Square with easy access to the airport, CBD and Centennial Park. One three-bedroom penthouse remaining.

PRICE: AUD 3.4 million (approx. USD 5.5 million), CONTACT:

This article was first published under the Special Report in Palace 18

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