Cooler weather today, Chris Mclachlan, Property NSW mowing under the Sydney Harbour Bridge 27th April 2017 Photo by Louise Kennerley smhThis year will go down as one of the most sizzling property years on record.
It was the time the red-hot market finally cooled a little; when more people than ever worried about combustible cladding on their homes and when anger over Airbnb in apartments and from renters on their insecurity of tenure threatened to boil over.
And neither the government nor developers were exempt from the heat. With the number of first-home buyers in the market plummeting, they were each under fire over the general unaffordability of homes.
So what were the Big Five issues making news in 2017? 1. House prices
After such strong price growth in the Sydney market, prices started to soften, showing a drop of 1.4 per cent in the third quarter to September. But this wasn’t enough to dampen the year’s growth so far, hitting a very respectable 9.4 per cent on n Bureau of Statistics figures.
But it was enough to spook some sellers. Calling the top of the market, they rushed to put their property up for sale – and the resultant sharp increase in supply is expected to lead to prices easing still further to the end of the year.
“Coming off the back of five years of amazing price growth in Sydney, we’re now going into a period of moderation,” Domain data scientist Dr Nicola Powell says. “In addition, buyers are starting to go into slowdown mode as we hit the holidays.
“But that softening of demand and increase in supply means good news for them – they’ll have more choice and they don’t have to make quick decisions. They can take their time and they might even be able to negotiate discounts.” Related: Sydney pulls national prices lowerRelated: ‘Credit squeeze’ could hit Melbourne pricesRelated: Sydney’s most expensive houses of 2017
That excess of supply over demand also affected the auction clearance rate, hitting a two-year low of just under 60 per cent in early December, with more than 100 vendors withdrawing their properties when they realised there wasn’t enough demand.
Experts think that rate could even drop as low as 50 per cent as the year ends, with buyers hanging out for early 2018 when they hope prices could drop further still. 2. Dangerous cladding
Following the inferno at London’s Grenfell apartment block in London that killed 71 people, after spreading via highly combustible aluminium composite panels, was on high alert for cladding on its residential buildings.
A Senate inquiry this year, also referring to the fire at the Lacrosse in Melbourne and The Torch in Dubai, recommended an immediate ban on the importation of dangerous panels and a clear line of responsibility for their replacements.
“Past practices saw some builders cuts costs and substitute fire-resistant products with cheaper imported combustible products in order to save a paltry $3 per square metre,” read a statement issued by two of the 13 members of the Senate committee, Chair Senator Chris Ketter and Senator Kim Carr. “These criminal activities must end ??? n lives are … at risk.”
New laws came in on December 18 banning the products, with large fines for any corporations using them on buildings, and a system of monitoring rectification work – although not forcing builders, developers or those responsible to pay for it.
The NSW government’s inter-agency Fire Safety and External Wall Cladding Taskforce has identified 1184 buildings in the state that may have suspect cladding, and confirmed 220 buildings, including 58 high-rise residential buildings, have cladding that requires further assessment. Local firefighters have been notified, in case there are fires.
But many owners’ corporations that have received notices indicating their homes may be at risk are experiencing big hikes in insurance premiums and excesses. “They’re paying the price of deregulation,” says Karen Stiles, executive officer of the apartment-owners peak body, the Owners Corporation Network.
“There is a lot of suffering out there right now, and there’s still no chain of responsibility for non-compliant products established. Flammable cladding is today the new asbestos.”
Paul Morton, CEO of Lannock Strata Finance, says a lot of apartment owners are in limbo. “They’re now wondering how they’re going to raise the kind of sums they need to fix the problem and it’s definitely not an option just to sell. No one else wants to buy into such issues.” 3. Airbnb in strata
The dramatic proliferation of Airbnb lettings in had its first major setback this year in what the global holiday letting agency has claimed is its most penetrated market.
While there are over 40,000 listings in NSW, with hosts said to earn an average $4400 a year, apartment strata committees launched a major campaign for the continued right to legislate against short-term lets in their buildings.
Their ire was ignited by last year’s Coure Report which, after a state government inquiry, advocated free rein for short-term letting in unit blocks, albeit with opportunities for strata committees to seek penalties for disruptive “party” hosts and guests. Critics said that would have fundamentally removed the idea of residential-only zoning.
The strength of the backlash from owners and residents led to the report being shelved and a new consultation process, in which the NSW government floated the idea that apartment buildings should be allowed to decide whether or not they wanted to permit short lets.
“Living in strata is a fundamentally different arrangement to living in a stand-alone house,” Our Strata Community, Our Choice spokesman Stephen Goddard says. “We share common facilities, we pay for common facilities and we collectively set the rules.
“We don’t want short-term letting banned, we just want to give apartment owners the say they deserve to democratically set the rules in their own buildings.”
The resultant revised legislation is expected in 2018.
Brent Thomas, Airbnb’s head of public policy ANZ, says the legislation needs to be more welcoming to Airbnb.
“Let’s embrace fair and progressive rules for home-sharing. Don’t close the door on innovation and the benefits Airbnb brings with radical policies that would rob people of their rights and burden them with more red tape,” he says.
Where buildings are currently zoned residential-only, it’s predicted the new laws will enable owners’ corporations to pass a bylaw confirming that status, so they can then either ban or restrict short-term letting in their blocks if they choose. 4. The year of the renter
With the prospect looming that there will soon be more renters than owners, tenants assumed a new importance in the eyes of politicians from both sides.
Only 51.7 per cent of ns aged 18-plus own a home, down from 57 per cent in 2002, new data from the Household, Income and Labour Dynamics in (HILDA) survey revealed late this year, which makes renters one of the fastest growing groups in the property industry.
Concerns about security of tenancy and fairness for renters was front and centre, with the Tenants Union of NSW holding a series of meetings with politicians as part of their Make Renting Fair campaign, endorsed by over 90 organisations, including community groups, churches and unions. It also lauded the Victorian government for introducing reforms to its tenancy laws.
Better Regulation Minister Matt Kean eventually announced that the NSW government would be developing legislation to improve tenants’ rights in the new year.
“No grounds evictions, retaliatory evictions, all these things are currently undermining renters’ rights in NSW,” Mr Kean said. “We want to make life fairer and better for renters in NSW.”
Julie Foreman, executive officer of the Tenants Union, welcomed the move. “[This year] has been dubbed the ‘year of the renter’ by Domain,” she says. “In fact, this is the year where there will be more people in Sydney who don’t own property than those who do.
“We continue to be active in working for structural reform to tenancy law. On behalf of the National Association of Tenants Organisations, in a landmark collaboration with Choice and National Shelter, we contributed to the design and distribution of the Unsettled report. This saw unprecedented media and political attention shift to tenants’ rights during the year. “
Renters also received an early Christmas gift with news that, because of the increasing supply of property, rents have fallen in many areas or, at worst, remained static. 5. First-home buyers
Nine out of 10 properties in the city are out of the reach of first-home buyers, a new Reserve Bank study has reported, with most having to move an average of 31 kilometres from the CBD to afford an apartment, and 56 kilometres for a free-standing house.
But while so many have been priced out of the market – the average first-time buyer has $474,000 to spend while the median price is over $1 million – they’re slowly returning to the market.
That was helped partly by a new NSW government package this year for first-home buyers, including abolishing stamp duty on all homes up to $650,000, giving stamp duty relief for homes up to $800,000, providing a $10,000 grant for builders of new homes up to $750,000 and purchasers of new homes up to $600,000, and abolishing insurance duty on lenders’ mortgage insurance.
In addition, there were moves to pull back investor spending – with foreign investors having to pay higher duties and land taxes and no longer allowing investors to defer paying stamp duty on off-the-plan purchases – that cut their competition for cheaper homes.
A number of developers, led by Mirvac, have put aside a proportion of more affordable homes in new complexes for first-timers, and asked for smaller deposits to help them on their way.
“We’re now seeing a lot more first-home buyers coming into the market since June,” NSW Treasurer Dominic Perrottet says. “And we want to see more coming in, so we’ve been partnering with the private sector to help that happen.”
With continued low interest rates, softening prices and the tough lending rules on investors, we’re likely to see more first-home buyers entering the market now than for a long time, says Rich Harvey, CEO of buyers’ agent Propertybuyer.
“There’s a lot more around now than at the beginning of the year,” he says. “With the market taking a bit of a breather too, there will be more opportunities for them going forward. It’s still tough for them, with most having to go to outer areas to afford homes, but their numbers will continue to grow.”