As a progressive business who has always valued qualified data, we understand the power of statistics and how helpful it is for us to share these insights with our clients. It is great to have partners like REA Group & Domain, who are able and willing to supply us with high level data analytics for the Northern Beaches micro market. This article is an excerpt from our latest edition of Insights, our Northern Beaches property market report. To read the full report, click here.
With a great deal of experience and market knowledge, we are able to interpret and translate this data into relevant information for our clients, and property consumers in general. We believe that looking back and analysing historical data helps us to look forward and understand what trends are emerging, how they will impact the property market and how we can best use those predictions to assist our clients in making more informed decisions.
Interpreting the data
The power of this PAST, PRESENT & FUTURE perspective is evident in the graph below, which charts new listings to the market (stock levels), as well as sales each year from FY09-10 through to FY19-20. This equates to 10 years of very clear data that provides great insight into the current market dynamics and assists in explaining why our Northern Beaches marketplace continues to see growth in values, when other markets may be struggling. While there are a number of variables at play (which we discuss in greater detail further on), the most simple explanation for our market’s consistent growth is the basic economic principle of supply and demand, which has been expressed as the main driver for peaks and valleys in property cycles.
These statistics show that since 2010 stock levels on the Beaches have been in steady decline (except for slight jumps in FY14 and FY18), having reduced by approximately 40% on average by the end of FY20. Interestingly, the number of properties sold over that same period has only reduced by approximately 25% overall. This shows that proportionately (and particularly over the last 6 years) demand has remained strong relative to supply, explaining why property values remain so high.
Why are stock levels lower and demand higher?
Seeing the decline in listings over the past 10 years leaves no doubt that our high demand/low supply marketplace is here to stay. As locals, we know that the Northern Beaches is truly the greatest spot on Earth (not that we are biased at all!), but there are a few other key elements which are impacting the supply/demand ratio.
People are staying far longer in their homes and undertaking renovations and rebuilds at a rate never seen before. With current property values where they are, there also appears to be little concern for over-capitalisation. We’ve noticed a definite shift in consumer sentiment, and there seems to be far less parochial attitudes towards specific “ideal suburbs” at play, with buyers opting for a broader or even regional view when it comes to a home’s location. There is no longer a location in our area that is not highly sought after! Further to that, the suburbs that were favoured in 2010 are not necessarily those of 2020, and the lines are being blurred between value variations of these locations as well.
The decline in stock levels also has a lot to do with the high cost of stamp duty in our state, which makes the transactional costs associated with selling and buying a significant factor and potential deterrent for property owners when considering their options. As a result, we have seen the average hold time for residential houses extend out to about 13 years in most locations, and as high as 17 years in some areas. Apartments are also now heading towards a 10-year average hold, doubling the average hold time in the past 15 years.
When it comes to the investor market, we have seen a trend over the last few years pointing towards a move from investment properties being treated as a short-term gain opportunity to more of a long-term strategy. Therefore, with lower stock in that space coupled with recent stamp duty concessions in NSW, demand in the apartment market is high. While this is good news for vendors, it ultimately has its impacts – primarily affecting the first home buyer market. At the same time, investors had been showing some caution due to the current Covid-19 economic conditions, however we are seeing shifting signs in the last few months with plenty of investors re-entering the market, and as a result creating competition against first home buyers and downsizers alike.
Another interesting factor influencing the Northern Beaches market is the much maligned “Baby Boomers” who are currently very active again after a retreat from the market during the initial stages of Covid-19. Even despite many new developments along the coast, the new supply is simply not matching this increased need of the over 55’s market, who are willing to pay accordingly for the right property.
With the lure of a sea change, or tree change, we have also seen cashed up buyers from locations such as the Lower and Upper North Shore, Inner West and more recently the Eastern Suburbs, putting more pressure on the available stock and further increasing demand for the limited supply. Whilst out-of-area buyers have always been attracted to our marketplace by the lifestyle elements and value on offer (compared to inner-city suburbs), Covid-19 has definitely increased demand from this segment. Working from home has now become the new normal and there’s much less of a need to live closer to the CBD.
To read the full version of Insights, our Northern Beaches property market report click here.