Request An Appraisal
· Join Up
PRD  →  Research Hub  →  In Focus Sydney Northern Beaches Q1 2011

In Focus Sydney Northern Beaches Q1 2011

Scope Over two years after the start of the 2008 Global Financial Crisis (GFC), a strong recovery is evident in the wider Sydney property market . Prices are at record highs, with only a moderate impact by consecutive increases in interest rates. However, the aftermath of the Crisis saw lending criteria tightening with some homebuyers finding it hard to obtain finance. A softening in market conditions are now apparent as result of the increases in interest rates. In light of a growing trend for knowledge, this In Focus Report highlights the current market climate and driving forces behind one of ...

Scope
Over two years after the start of the 2008 Global Financial Crisis (GFC), a strong recovery is evident in the wider Sydney property market . Prices are at record highs, with only a moderate impact by consecutive increases in interest rates. However, the aftermath of the Crisis saw lending criteria tightening with some homebuyers finding it hard to obtain finance. A softening in market conditions are now apparent as result of the increases in interest rates.

In light of a growing trend for knowledge, this In Focus Report highlights the current market climate and driving forces behind one of New South Waless most exciting markets. The Sydney property market, and in particular suburban beachfront regions such as the Northern Beaches have been setting the benchmark across Australia in the past decade, with demand often outstripping supply and exceptional capital growth buoyed by robust sales volumes. This report analyses the Manly, Warringah and Pittwater Local Government Areas (LGAs). It covers the demographics of the area and the inherent fundamentals underpinning the performance of house and unit products in this region.

Area Characteristics
Bordered by Middle Harbour and the Pacific Ocean and located13 kilometres from the Sydney CBD, the Three LGAs span over an area of approximately 255 square kilometres. The Manly LGA is famous for its restaurants, cafes and the famous Manly Beach, while Warringah and Pittwater LGAs offer a relaxed environment close to the ocean and several national parks. The three LGAs are serviced by Military Road and Warringah Road, as well as the Wakehurst Parkway and Pittwater Road. Regular ferry service to the Sydney CBD is available at the Manly Wharf. The Northern Beaches stylish homes and attractive beaches resulted in a strong tourism and service based economy, with business centres in Manly, Brookvale, Belrose and Mona Vale.

Demographic Snapshot
According to the Australian Bureau of Statistics (ABS), the most recent Estimated Resident Population (ERP) figures suggest that Sydneys Northern Beaches are home to 243,849 residents as at June 2009. Manly and Pittwater LGAs recorded a 3.2 per cent population growth in the twelve months to June 2009 further highlight the appeal of the region, in particular when compared to the Sydney Metropolitan average growth of 1.3 per cent over the same period. The NSW Department of Planning projections for the Northern Beaches indicate a population of 250,300 residents in 2016 and 277,100 by 2036. The median household incomes range from $1,387 to $1,705 per week indicates a relatively wealthy population, with an average of 27 per cent of residents represented in the highest weekly income bracket of $2,500 plus. The Northern Beaches Statistical Region registered an unemployment rate of 3.5 per cent in 2008 to 2009, significantly lower than the 5.7 per cent unemployment rate in NSW.

Northern Beaches House Market
The first half of 2010 saw the Northern Beaches maintain their attraction to buyers seeking beachside living within close proximity to Sydney CBD. A combination of strong population growth, limited amount of new supply and record low interest rates during the GFC lowered affordability barriers and led to buoyant demand which increased the pressure on house prices. Closing the June 2010 half year period at $1,000,000, the median sale price for houses in the Northern Beaches market recorded an annual growth of 15.6 per cent. Looking over the longer term, a growth rate of 6.8 per cent per annum was maintained in the past 10 years.

The median price was attained from a total of 1,339 house transactions, 55 per cent of which transacted within the Warringah LGA, with the remaining 45 per cent divided between the Manly LGA (14 per cent) and the Pittwater LGA (31 per cent). This level of sales represented an increase of eight per cent over the same period in 2009, and is 4.5 per cent below the five year average sales level of 1,402 transactions per six month period.

Observing sales activity by price points, the majority of sales in the Northern Beaches transacted in the $700,000 to $899,999 price bracket, accounting for 29 per cent of the market. At the lower end of the market houses selling below $700,000 accounted for six per cent of sales while at the top end 147 transactions, equating to 11 per cent of the market, sold for in excess of $1.9 million.

In the past two years a shift towards the higher price brackets can be noticed. The portion of houses selling in the bottom price bracket of below $700,000 decreased 40 per cent in the six months to June 2010, and 63 per cent from the June 2009 half year. At the same time, the top price bracket of $1.9 million plus experienced a 38 per cent increase in size from only eight per cent of the market in the June 2009 half year to 11 per cent of sales for the same period in 2010. This trend can be largely attributed to the change in the type of market participants as first home buyers activity wound down while investor and upgraders activity increased.

To better understand the actual capital returns achieved by vendors who sold during the period, PRD Research conducted a resales analysis of the Northern Beaches house market. The analysis revealed an average annual capital growth of 5.7 per cent per annum for those who exited the market in the six months to June 2010, with an average holding period of 5.3 years between resales.

2010 marked a year where the house market remained partially induced by the 2009 Government Stimulus measures and well positioned purchasers capitalised on larger properties selling at discounted prices. Looking into 2011, it is likely that the November 2010 interest rate increase will lead to softer conditions, particularly at the bottom end of the market. It is expected that investors, lured by the location and amenities of the Northern Beaches will keep the top end of the market active.

Northern Beaches Unit Market
The number of units in Sydneys Northern Beaches increased in recent years to become the dwelling type of choice in many of the regions suburbs. In the Manly LGA, units and townhouses represent 56 per cent of all dwellings, while in the Warringah and Pittwater LGAs strata titled dwellings account for 37 per cent and 20 per cent of the housing stock respectively.

The median sale price for units in the June 2010 six month period climbed to $549,500 stemming from a total of 1,316 transactions. This median figure represents a twelve month growth of 13.3 per cent, while the 10 year growth rate of 5.6 per cent per annum indicates a stable long term performance.

Most unit transactions took place in the $400,000 to $499,999 price bracket capturing 23 per cent of the markets activity, closely followed by the $500,000 to $599,999 bracket which accounted for 21 per cent of the market. At the lower end of the market, a unit in Wanganella Street, Balgowlah sold for $165,000 while at the top end a premium of $4,500,000 was paid for a beachside apartment on North Styne, Manly.

The price point chart shows a shift from lower to higher price brackets across the Northern Beaches unit market. At the lower end of the market, transactions below $300,000 declined by 50 per cent between the June 2008 to the June 2010 half year period. The top end of the market had a marginal increase in activity while the middle brackets of $500,000 to $599,999 and $600,000 to $699,999 increased by 31 and 88 per cent respectively.

New Development
New stock currently under construction or recently completed includes several projects on Darley Street in Bayview and Mona Vale, and on Pittwater Road in Manly and Narrabeen. Due to scarcity of large development sites in the region, new projects rely on demolition and consolidation of existing sites.

Northern Beaches Rental Market
Over the last year rental vacancy rates within the Northern Beaches have tightened from a figure of 2.3 per cent in November 2009 to 1.2 per cent in October 2010. Data suggests a cyclical trend in Sydneys middle ring suburbs of which the Northern Beaches are a part of, with lower vacancy rates during October and higher rates in July.

The rental growth cycle chart below shows the median weekly rent for a three bedroom house in the Pittwater and Warringah LGAs increased by 12.1 and 10.8 per cent respectively in the twelve months to September 2010. During the same period the Manly LGA experienced a small decrease in median rent.

Conversely, the median weekly rent for a two bedroom unit in experienced an annual increase of between 5.1 per cent in the Warringah LGA and 7.0 per cent in the Pittwater LGA, a significantly lower growth level than that of houses.

To better understand the level of rental prices in the Northern Beaches PRD Research conducted a ten year analysis comparing the regions median rental price with those of the Sydney Metropolitan Area (SMA). The analysis revealed that over the past ten years the Manly LGAs median weekly house rent more than doubled that of the SMA ($838 compared with $390 per week in September 2010), while rents in the Warringah and Pittwater LGAs were approximately 180 per cent more than those in the SMA.

Looking forward, there is no reprieve for renters in the short to medium term. The Northern Beaches strong population growth, coupled with a shortage in available land and limited amount of new stock coming on the market suggest a tight rental market.

As capital gains outpaced rental markets in 2009 and the first half of 2010, the rent-to-price ratio declined. It is expected that this ratio will improve in 2011 as the market consolidates and rent prices rise, providing further incentive to investors to increase their participation in the market.

In Focus - Summary
Strong capital growth units in the Manly LGA increasing 22.3% in the year to June 2010.
Strong rental growth - Pittwater LGA median rent increased by 12.1% in the year to September 2010.
Shortage in vacant land and the limited amount of developments have created a cap on supply of new units into the market.
Strong population growth increased demand for beachside living within close proximity to the city.

Popular

Latest

 Connect with us