When will the market craziness end in The Sutherland Shire?

1. Introduction

Sydney’s property market has continued its strong performance in May and June, with demand continuing to outpace supply. A report recently released by ANZ, predicts Sydney house prices may increase by up to a further 19% by the end of 2021.

Upgraders, investors, and first home buyers are feeling confident and are out in force. To compete, motivated buyers are having to move quickly, and we are seeing well-presented properties achieving strong record results.

There are multiple factors driving these run-away results – strong demand for larger dwellings is continuing to grow, the current low cost of debt, the strong prospect of continued capital growth, and first-home buyer enquiry continuing to increase according to realestate.com.au.

However, while demand continues to remains strong, there is evidence of cooling pressures emerging. Online search activity from prospective buyers, though still relatively high, is starting to trend downwards, according to realestate.com.au. In addition, there are fears that interest rates may soon start to increase slowly.

Will price growth slow? Will some pockets of the market crash? What does this mean for the local market? Let’s delve into how this is translating to sales and prices locally.

2. What is currently happening in the local market?

We are seeing strong price growth in Engadine, Heathcote and Woronora Heights as buyers fiercely compete over limited “family-friendly” stock.  With the median sales price of houses just over $1,000,000 in the region according to realestate.com.au, Engadine, Heathcote and Woronora Heights appeal strongly to established families, first-home buyers, and investors alike.

However, it is the family buyer – those looking to upsize into a larger, more comfortable family home – that is driving this strong demand.  With over 83% of the region’s current residents being owner-occupiers, and with 30+ family-friendly parks on offer, it is little wonder family buyers are committed, and competing to get more “home” for their money.

3. What is driving the strong local demand?

The strong local demand is being driven by two key factors – low interest rates and low stock levels. With interest rates currently being just above zero – and with the Reserve Bank assuring us they’ll stay like that for the next few years – it is little wonder buyers are confident and looking to take advantage of this opportune time to upgrade.

We’re also seeing investors steadily return to the market. The median rent for houses in Engadine and Heathcote is currently $650 per week, which translates to an annual rental yield of approximately 3.3%. This would have been considered an average return not so long ago, but with record low interest rates, that perception has certainly changed.  As more positive cash-flow properties are listed for sale, investors will be further enticed to return to the market.

However, as we continue through winter, the volume of well-presented, well-located stock is likely to decline; further contributing upwards pressure to demand and prices.

4. When is the local market craziness likely to end?

Both buyers and vendors have been asking our agency this question multiple times during the past quarter; a quarter where we have successfully sold over 40 properties, while prices have risen 10% across the board.  This price growth trajectory is clearly unsustainable, and there will come a time when this “craziness” subsides.

In particular, at the beginning of 2021, there was significant first-home buyer FOMO (fear of missing out) in the market.  While this has not disappeared entirely, first-home buyer FOMO has certainly subsided, reducing the pressure on prices, according to realestate.com.au.

We believe once market interest rates and quality property listings start to increase, this is likely to bring the market into balance. With the spring market being just around the corner, and with many vendors waiting on the sidelines to list their properties, this is likely to bring an increase in the number of well-presented, well-located properties to market – potentially then slowing the rate of price growth.

5. Our projections for growth and opportunities for the next 3 months

Within Engadine, Heathcote and Woronora Heights, well-presented houses have been in high demand and performing well for many months. This has resulted in well-presented and well-located units, comparatively becoming some-what of a “great buying opportunity”.

As we approach spring, we believe we’ll start to see some “craziness” come out of the market with prices cooling and stabilising slightly; resulting in a much healthier and sustainable local market.  However, as other parts of NSW continue to become out-of-reach for many buyers, Woronora Heights, Heathcote and Engadine – with their large, well-presented and comfortable family homes – will remain in demand for potential buyers who see value in the region.

This is likely to result in continued price growth, albeit at a lower rate, and strong offers being made for good quality, well-located property, where committed buyers can begin to enjoy an exciting new lifestyle.