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It took three years for marketing executive Lara Rinaldi to find her first home. And she couldn’t be happier with the timing.
Rinaldi, 32, initially started looking for a two-bedroom apartment when she was single but couldn’t find a property she was “comfortable” with. Over time, she met and married her husband and they started saving together, eventually amassing a $500,000 deposit.
This year, they decided the time was right, and four weeks ago, they settled on a five-bedroom, three-bathroom duplex in Georges Hall for $2 million.
“I got a sense the market was softening,” she says. “The cash rate increased [knocking out some competition] and I thought it was the best time for us to jump in given we had a decent deposit.”
While the newly built home is a little further out than they had planned, she estimates they have saved about $200,000 on last year’s prices.
The latest Domain House Price Report released last week revealed Sydney’s biggest price rises and falls, with affordable suburbs continuing to record the strongest growth for houses. Cabramatta, North Richmond and Ourimbah experienced price increases of 27 per cent or more over the past 12 months.
By contrast, the top 10 list of areas with the biggest price drops is dominated by prestige markets, with Bronte, Birchgrove, Woollahra and Mosman experiencing house price falls of 8.5 per cent or more over the past year, as well as suburbs such as Marsfield and Parramatta [falling 21.2 per cent and 10 per cent respectively], areas characterised by higher-density development.
“This is textbook downturn for Sydney, where you see the more expensive suburbs moving first and shifting quite rapidly,” said Domain chief residential economist Dr Nicola Powell.
For units, the seaside suburbs of Fairlight and Bondi Beach had considerable increases, along with inner-city locales such as Chippendale and Woolloomooloo. Units in the prestige suburbs of Forest Lodge, Turramurra and Darling Point fell in value by at least 14 per cent over the same period.
Powell said the federal government’s changes to negative gearing tax arrangements, announced in May, have been evident in the Sydney market, with sales agents reporting investors leaving almost overnight.
“Sydney is such a high-priced market, any movement in interest rates has a more substantial effect here than any other city in Australia,” she said. “The other reason we are seeing weaker sentiment is the policy change to investors. That attitude switched overnight and Sydney is very exposed to investor participation.”
She described it as the sharpest price fall in Sydney in 30 years.
“Normally with a downturn you see every quarter going into lower growth, but the June quarter was quite an abrupt start to the price falls, and the data has already borne that out.
“Whether we continue to see a three or four per cent drop – that is a substantial drop – it will be a crescendo getting to that point.”
Ray White chief economist Nerida Conisbee said while news this week that inflation had risen to 3.8 per cent, less than the RBA expected, had eased pressure for another rate rise, there may still be turbulence ahead for the broader housing market.
“Inflation is still too high, although it came in less than the RBA forecast intended it to. The interest rate rises have been used to slow prices and they are having their intended effect,” she said. “But the housing costs in inflation are rents and construction, and construction prices are continuing to rise. Rents are also still seeing strong growth.
“We are not out of the woods [with rate rises] yet.”
Shay Waraker, credit expert at Loan Market, said while investors were “taking a breather” from Sydney property, first home buyers still faced strong headwinds.
“People need larger deposits to purchase, even with the [federal government’s] 5% Deposit Scheme,” she said. “If they are trying to purchase a property for [the median house price], with just five per cent deposit the repayments are crazy.
“It is not really feasible to get into the market. That has greatly impacted first home buyers.”
Sydney auctioneer Edward Riley said the flow-on effect on the real estate market is hard to pin down.
“It’s a bit all over the place. I can go from one suburb to the next and have completely different outcomes,” he said.
“But properties hoping to achieve the prices from 12 months ago, they will get hammered.”
For buyers, he said there was opportunity to negotiate a lower price. For vendors, even where prices were declining, Riley said there was a silver lining.
“You might not get what you are after selling your property but as the market continues to soften, you can negotiate hard on your next property. It’s definitely an upsizers’ market.”
