In today’s show, together with George Raptis from Metropole Property, we look at the property market in New South Wales. We talk about some of the no-go areas in Sydney and the areas showing some really good potential.
Kevin: We’ve left the big one till last, and by “the big one,” I’m referring to New South Wales, more particularly Sydney. There’s been a lot of talk about what’s happening in Sydney. Those ripples have gone right through the country. We’re seeing politicians scrambling now to come up with different ways to get people into property.
But let’s find out what is happening on the ground in Sydney, talking to buyer’s agent George Raptis from Metropole Properties. George, what are you hearing? Is it as bad as what we’re hearing?
George: Hi Kevin. Gee, you can’t pick up a newspaper today without seeing what’s going on in the Sydney property market. I guess it’s splashed all over the front pages everywhere on the media and so forth.
Look, Sydney still remains the standout performer of all the capital city markets. I guess what we are experiencing is stock levels that are at an endemic low. Where we are struggling is we’re struggling with a chronic undersupply of property.
Properties that are being advertised currently are being sold at a faster rate than what they’re being added. Obviously, that creates a bit of a furor out in the marketplace. We finished the year strong 2014. 2015 has picked up where we’ve left off. Auction clearance rates around that mid-80% band. Some areas are probably in the low 90s. Sellers are confident. They’re reading in the papers every Sunday how things are selling above reserve and what have you.
Interestingly, buyers are still confident. But what I’ve noticed is that your first-time buyers have really dropped off, and we’ve had that surge of investors that are entering the market and coupled with what we would call the change-up buyers – in other words, people in a position where they are up-sizing, down-sizing, that sort of thing – so it’s a bit of licorice allsorts, really.
Kevin: There’s a bit of talk also about wanting to put some prudential controls in against agents in terms of under-quoting and so on with restrictions on that, even talks of banning “offers over” and things like that. What’s your view on that, George, as a buyers’ agent?
George: Look, having been on the other side of the fence, I can understand looking at it from both perspectives. Look, it can only be a good thing. At the end of the day, we want buyers to be protected, we want people to get realistic information.
The last thing you want to see is people being in a position where they’re traipsing from one auction to the other, spending good money after bad on Strata Reports or Pest and Building Inspections and end up at the auction and do get blown out of the water on the first bid. So I can only see it as a good thing and that’s something obviously the various real estate institutes are working towards.
Kevin: I want to find out from you, too, about some of the no-go areas in New South Wales – you may even want to focus on the Sydney market – and also look at some of the areas that you think might be worth our while investigating.
George: No-go zones would be where we’re going to see a bit of an over-supply of properties, especially in those old commercial, industrial estates where they’ve gone by the wayside and have been replaced now with big, monstrous high-rise developments where they’re building thousands and thousands of these new things. I’d advise to keep well away from those sorts of things.
Also where there’s abundance of land where they’re unlocking new estates, where they’re building new properties and selling them off to would-be investors or first home owners and then unlocking the next estate and so forth. I’d be keeping away from those.
With regards to some good opportunities, especially in Sydney, if we’re talking apartments, there are some good little pockets of property where you can still get into something under that $500,000 threshold, which by Sydney standards I think is very good.
Little pockets in like the south of Sydney, places like Bexley, which are about 12 or 13 kilometers from the CBD, showing you can still buy a good two-bedroom unit there for under $500,000. Places like Penshurst, which is about 16 kilometers south of the CBD, but on that Illawarra train line, where you can still buy two-bedroom apartments for under $500,000. I think it’s good value by Sydney standards.
Kevin: What would that be renting at? What sort of returns would you get?
George: It depends on the price, it depends on the quality of the property, and so forth. But look, you should be getting somewhere in that 4% or 4.5% rental yield.
Kevin: That’s good. And still getting reasonable growth on those units?
George: They’re showing some really good growth, because what people are looking for is a bit more bang for buck but they still want to stay within the parameters of their comfort zone – in other words close to their jobs, friends, close to infrastructure, transport hubs, recreational facilities, and so forth.
Kevin: Good stuff. Always great talking to you. George Raptis from Metropole Properties. That’s the wrap on Sydney. Thanks for your time, mate.
George: Thank you, Kevin.