Sydney Morning Herald - December 15, 2004
Investors flee crumbling home market By Jonathan Chancellor, Property Editor
Investors have fled the Sydney property market while sales have fallen to their lowest level in more than 15 years.
The number of auctions listed for the spring season, just completed, fell by almost 50 per cent and the spring sales were at their lowest since 1988, barring the Olympics year.
Prices fell by up to 15 per cent this year, market commentators said, although prestige homes in most suburbs remained the strongest performers.
The figures suggested Sydney was returning to a traditional market, driven by home buyers, not investors, said the NSW president of the Real Estate Institute, Rowan Kelly.
Housing Industry Association figures show there have been 3000 fewer investors in NSW every month since June, when the State Government introduced its tax on the sale of investment properties.
Investment property spending dipped to $2.1 billion a month, compared with the $3 billion a month spent last year. According to the Home Price Guide, sellers were typically accepting an 8 per cent discount on asking prices to achieve a sale.
The market has been weakened by small investors redirecting their funds to shares, as well as property investors looking outside NSW for opportunities.
An economist for the Housing Industry Association, Harley Dale, said: "There is certainly no shortage of anecdotal evidence that the investment exit tax had an immediate and significant negative impact."
Those looking for quick profits have been hurt more than most.
A house in Hayes Street, Neutral Bay, sold for $2.2 million in September, despite the seller paying $2.6 million for it late last year and making renovations.
A two-bedroom flat in Bellevue Hill that sold for $640,000 last year was resold for $445,000 in April, and a house in Vaucluse worth $5.5 million last year lost $400,000 when it was sold last month.
The average time a property is on the market before selling is now 83 days, compared with 57 days this time last year.
Catriona MacDiarmid, an agent for the statewide property sales network EcoProperty, said some of her colleagues were reporting "the quietest market generally for seven years".
The price discount was about 4.5 per cent last year, when owner-occupiers were competing with investors. Most agents suggest the market has lost recent gains, with prices falling back to 2002 levels. "We have experienced a change in sentiment that has resulted in the market cooling by some 15 per cent," said Anthony Puntigan, of Bradfield & Prichard Double Bay.
The number of auctions fell from 19,000 last year to 12,000 this year, with many vendors preferring to sell by private treaty. Agents had 3280 auction listings this spring, down 47 per cent on the 6240 of spring last year, the Home Price Guide shows. About 70,000 properties are expected to be sold by private treaty this year, compared with the 90,000 last year.
"Property volumes were down, yet demand failed to match supply," said Robert Simeon, of Richardson & Wrench Mosman.
The head of property research at Macquarie Bank, Rod Cornish, believes the fall in volumes is a positive sign, because owners are not being forced to sell as in previous downturns.
An economist with AMP Capital Investors, Shane Oliver, said money was still coming in from investors, "but there is a hell of a lot less than when investors constituted 47 per cent of loans approval. Now it's back to 40 per cent, and still sliding away."
Agents predict more of the same next year, with the low level of supply playing a big role in putting a floor under falling prices.