The median dwelling value in Sydney dropped to $789,339 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 per cent of mortgages taken out in December, up from 20 per cent in February 2017.
“My hunch is it’s a pretty good time to buy,” said Stephen Koukoulas, the managing director of Market Economics Pty and a former adviser 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 per cent, is around the lowest since 1993, according to the Reserve Bank of Australia. In Sydney, median weekly house rents declined 1.8 per cent in the December quarter from September, and apartment rents dropped 2.8 per cent, 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 per cent 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 per cent.
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 per cent in the past year. The Tasmanian city is benefiting 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 per cent in the three months through February, compared to a 3.3 per cent decline in the combined capitals.
Those companies that whisk in, take the tired furniture out and magically make homes look lovely are also benefiting from the property downturn. More than ever, there’s a realization by vendors that homes must be at their most presentable in order to maximize the sale price and minimize the time spent on the market.
David McLean, general manager of Furnish&Finish, said a professionally styled property can shave about four weeks off a marketing campaign and add about 12.5 per cent 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 $100,000 more.
Valiant Hire is also in the residential styling business. Co-founder Steve Remington said inquiries were up about 25 per cent 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.”