This week we bring you the October edition of Insights with John Cunningham and Andrew Lutze. John and Andrew bring you a comprehensive view on exactly what our local market place looks like as we head towards the end of a big and unprecedented year.
As you will hear, our market continues to strengthen back towards pre-Covid values and we are also seeing open homes numbers hovering around the numbers we were seeing back in the peak of 2017. Another interesting trend we are seeing is the amount of buyers looking to purchase lifestyle properties, either to live in or use as an investment or weekender. Now that a lot of people are able to work from home and have more flexible arrangements, the need for multifunctional living spaces and home offices has grown. John and Andrew also discuss the suitability of a home, presentation and how they buyer will respond in today’s market. Click to take a listen or read the transcript below.
John – It’s interesting that when you look at that also from a rental perspective, we’ve seen the same thing happen.
We’ve seen the days on market and on average for rentals down at 14 days. We’ve seen people moving from one bedroom apartments to two bedroom apartments. Seen them move from smaller two bedroom apartments to bigger two bedroom apartments or moving from apartments to houses. So it seems to me that space has been valued just as much as location now.
Andrew – Yes, yeah. I think that’s whilst people used to say, I’d love to live in that street, I’d love to live in that suburb, I think the scarcity of property available has enabled them to take a closer look at the actual property itself and saying, “well if this is home , what can I improve on it?” And that’s really been the fascinating thing. And it’d be good to dive into average price ranges soon.
John – Yeah.
Andrew – Because I think we’re seeing more people who are staying at home are improving their homes. And that’s putting again a different bit of a skew on that average sale price.
John – It really has, hasn’t it? We are about to launch our insights report for 2020 in the next couple of weeks. And one of the big findings in that is that the medium price on the Northern beaches in our area of operation, which is from bridge to bridge, it’s the Spit bridge to the Narrabeen bridge is now our primary area of operation. We’ve seen the median price for a house increased 82% over the last 10 years, but an apartment has been 67%. Can you explain why that would be?
Andrew – Yeah, it’s a fascinating statistic because a lot of people who are moving into their homes, we’re starting to see more people who are looking at that granny flat option. We’re also seeing more people with generational living and now this year, it’s the home office.
John – Yeah.
Andrew – So people who don’t have that space, they’re trying to create that space. And that’s partly driven by the fact that moving is so damn expensive. To have pay the stamp duty of what it costs, to make that decision. You can’t flip houses like you can in New Zealand, for example. Because the taxes here are so high.
John – That’s right, Yeah.
Andrew – So we’re seeing more people who are saying, if I can’t stay in the area, if I can’t create what I want here in my house, then yes I’ll move. But if I can stay, and I’ll give you an example, there’s a, take for example a little cottage in freshwater for $2 million.
John – Yep.
Andrew – There is that price, the average sale price of $2 million for that cottage. That person comes along and knocks it down. They spend one and a half million dollars putting a new home on it. And now the average sale price for that type of property is three and a half, or could be four million. Because there’s so little of it available. And then that healthy demand just drives that pricing. So I think we’re going to see more and more of that type of property.
John – So the statistics on that then, skew the whole data. Don’t they?
Andrew – Correct.
John – Because we’re seeing so much more property improvement, renovations, extensions and so on. Skewing the price, the median price of houses compared to two apartments. And then therefore you can look at it and say, “Oh, I’m better at investing in, in houses,” which leads to another interesting question. When we look at the, what we call. A B and C grade properties in the marketplace. It’s always a tricky one. Isn’t it? To say where do I invest my money? I can get everything I want this property, but it’s a B or C great property. It might be the best location. Is it going to give me the best long-term possibilities, but at least I can get into the marketplace. What you thinking on that sort of approach?
Andrew – Yeah, and a lot of owners ring up and say, “well, Andrew, why hasn’t my property grown “like the 82% in 10 years, “like everyone else” And there’s some fundamental things you can’t change, in most properties. And I talk a lot about this at open houses and people who are just inquiring about the market, but also to homeowners and then, we come around and price and we look at things like topography of land. The more level the land is, the broader demographic of buyers you’re gonna appeal to as well. The closer proximity you are to the water, that’s going to increase value, of course, but the parking element very, very important. A car space versus a lock-up garage versus a carport. There are fundamental differences and the value increases significantly based on those things. Having an aspect of North facing backyard that will have a very big difference. And these extra qualities, You put them all into a little bucket and you say well, if it has all those things, great. That’s an eight grade property. If it has two or three of these things that are challenged, the more steeper the terrain obviously, the limited buyer pool, who’s going to appeal for that. And that doesn’t mean that property won’t sell well. And in fact, most of the time they do sell very well.
John – Is that price point? Isn’t it?
Andrew – Yeah. That’s right. And I think it’s just a suitability issue now for most people suitability in our property, I love an end road, but it doesn’t quite have this, or it doesn’t have quite a level access or my family can’t play in the backyard here. Those suitability issues don’t become a problem when the price is excellent.
John – Correct.
Andrew – And that’s what we call a fire sale. Unfortunately, sometimes we, when the price becomes so attractive that people will overlook some of those fundamental important things that they like and what they need in a property, just because it’s actually affordable.
John – I suppose that’s reflected into the response rates we’re getting in the marketplace. We can see one property gets first launched a weekend, 52 people come through. 50 groups of people and then another one five,
Andrew – That’s right and it’s, either reflected in what it offers or what it’s, where it’s priced at price. Yeah. So it’s a matter of making sure you understand that in the marketplace.