Simply put, property will be as steady as she flows: Robert Simeon

Sydney’s established suburbs have just one thing in common when we talk about their existing houses in that for years now we have seen no new housing developments – they have simply dried up.

They no longer exist nor will we see any more new developments, so the number of houses in a particular suburb is all but fixed forever. Unlike outer Sydney where new housing estates are being released at the fastest rates ever witnessed before to meet the growing consumer demand – however the new markets are totally different from the established property markets.

It’s interesting to note that the established housing markets are contracting with less properties being offered to the marketplace which is underpinning property prices. Just as interesting is the observation that the overseas buyers are now strong participants in the established Sydney property markets followed by the local buyers in close pursuit.

This is what many are calling the perfect storm where if you removed the overseas buyers the Sydney established property markets would bear no resemblance to what we witnessed in 2015. With the NSW government now fixated on high – density residential strata developments many property buyers are observing that established houses are the best investments because production has ceased.

Whilst the NSW government has no problems encouraging the new residential subdivisions of airspace we certainly don’t envisage we will see any outdoor public spaces being converted to residential housing subdivisions.

We can also throw into the ‘perfect property storm’ record low interest rates where households are leveraging their borrowings to the maximum in order to take full advantage of the lowest rates in property history. When they leverage high this takes longer to pay down the principal home loan which in turn slows down the number of properties being offered to the market place which is exactly what we are witnessing today.

Just as interesting is that the last cash rate increase by the Reserve Bank of Australia (RBA) was back on November 3, 2010 when the RBA increased the cash rate +0.25 percent to 4.75 percent.

To show further proof a recent analysis by Digital Finance Analytics identified that 13 percent of households with an owner occupied loan would be in financial discomfort if rates were to rise at all. This is a smaller proportion to investment property owners who came in at 27 percent. However, more than one third of households said that they would be in difficulty if rates rose by 3 percent.

With many property owners closely following the cash rate musings emanating from the RBA – they may be better advised to watch their respective lenders a lot more closely.

Business analysts warned this week if there are no RBA cuts in 2016 then the banks would again act independently by announcing their own independent rate increases. Many quickly forget that in 2015 the big banks joined hands and raised their respective rates between 15 and 20 basis points.

Based on this data, for that to happen we would see the investment property hardest hit with a very distinct possibility of surging nervous investors trying to off – load their newly acquired investment properties. On the flip – side the major banks are most concerned that this newly created investment property loan portfolio has them exposed – so we in all probability will see them massaging their mortgage books in 2016.

This of course does not bode well for all the new developments awaiting release to the respective marketplaces where Melbourne has approximately another 20,000 new apartments ready to be released over the next five years with Sydney sitting at around 6,000 new apartments.

Then of course we have the dilemma with the apartments already sold off – the – plan with plenty of talk that many of those won’t proceed with their contracts. In particular the Big Four banks are only too well aware of their exposure to these new markets. That would explain why they have commenced their whisper campaigns – where we can expect to read plenty more in coming months.

When the property flows are weak the prices shoot up which is exactly what has happened to the established markets. The new investment markets are the ones that dominated in 2015 so there is a very good chance they may dominate conversations in 2015 for all the wrong reasons. What also needs to be factored in are the new developments where 100 per cent of these apartments were sold offshore. It’s anyone’s guess what may happen should we see these newly created markets start showing the first signs of panic.

MOSMAN – 2088

• Number of houses on the market this time last year – 58

• Number of houses on the market last week – 36

• Number of houses on the market this week – 45

• Number of apartments on the market this time last year – 43

• Number of apartments on the market last week – 32

• Number of apartments on the market this week – 38

CREMORNE – 2090

• Number of houses on the market this time last year – 8

• Number of houses on the market last week – 9

• Number of houses on the market this week – 11

• Number of apartments on the market this time last year – 18

• Number of apartments on the market last week – 11

• Number of apartments on the market this week – 15

NEUTRAL BAY – 2089

• Number of houses on the market this time last year – 4

• Number of houses on the market last week – 6

•Number of houses on the market this week – 6

• Number of apartments on the market this time last year– 37

• Number of apartments on the market last week – 23

*Number of apartments on the market this week – 27

 ROBERT SIMEON is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog Virtual Realty News since 2000.