Bondi beach, Sydney, NSW, Australia - November 1, 2015: People swimming in the fresh water swimming pools built in to the sea with waves rolling in to Bondi and breaking against the edge of the pool Getty Images
Fresh-water pool at Bondi Beach, Sydney © Getty

In 1907, swimming trunks were causing scandal in the Sydney press. Male swimmers were denounced as “vulgar beasts” for their revealing beach attire. Waverley Council proposed that men must wear swimming skirts that would keep them decent to the knee. Thousands of men swarmed Bondi, Manly and Coogee beaches wearing borrowed women’s petticoats and ballet frills to protest against the threat to their masculinity.

They won. The Sydney Morning Herald dismissed the proposals as “an instance of the official mind run mad” and swimming trunks got a free pass. Now it is the city’s property market that is grappling with official regulation.

Sydney is home to astronomical prices. In September, Ken Jacobs, an affiliate of Christie’s International Real Estate, sold the 1.12 hectare Fairfax Estate Point Piper in the Eastern Suburbs for A$100m (US$72m). In the decade since the financial crash, Sydney property prices nearly doubled, says Erin van Tuil, partner at Knight Frank Australia. Between December 2013 and December 2017, the average prime price per square foot increased by 59.8 per cent from A$664 to A$1,061, according to Savills World Research. Now, quite suddenly, prices have started to shrink.

Sydney’s median house price in September was 6.5 per cent down on the previous year, according to the property portal Domain House Price Report. Prices dropped by 3.1 per cent in the third quarter alone. Transaction volumes of homes priced above $3m have fallen by 30 per cent in the past year, says Darren Curtis, managing director at Ken Jacobs.

A surfing Santa
A surfing Santa © Ian Bird/REX/Shutterstock

The average number of days a property is on the market has increased from 22 to 46 days in 18 months, says Charles Caravousanos, director of residential at Savills Sydney. Most homes are put up for sale via auction but the percentage of successful sales has dropped from nearly 90 per cent to 41 per cent across the same period, says Caravousanos. The majority of sales now happen post-auction and with a citywide average discount of 12.6 per cent, he adds.

There are two causes. First, Australia is undergoing a royal commission into banking policies. The resultant new laws have had a dramatic impact on the mortgage market. Banks can now only grow their portfolios by a maximum of 10 per cent a year with investment loans. It is now “very, very hard for people to get finance”, says Caravousanos. “People are generally getting approved for about 70 per cent of what they would have been previously.” Additionally, one in every five loan applications that has written approval — which was considered sufficient guarantee for a buyer to make their 10 per cent deposit payment on a property — is now up for audit. Approval can be withdrawn after buyers have made their down payments. The impact is biggest at the lower end of the market, according to agents. Prime purchasers rarely need a mortgage, says Curtis.

The second problem is that the prime sector in many parts of the city has been heavily reliant on Chinese money.

Double Bay and Dover Heights in the Eastern Suburbs, where homes achieve up to A$30m, are Sydney’s most prime neighbourhoods, says Caravousanos, closely followed by Mosman, Cremorne and Neutral Bay in the Lower North Shores. In Cremorne, a three-bedroom apartment is on the market with David Murphy Real Estate for A$1.2m.

All are heartlands for Chinese buyers looking to invest or get their children into Australia’s education system. “The main driver is schooling,” says Curtis. Two years ago, nearly 80 per cent of prime market buyers were international, the vast majority of which were coming from mainland China, says Caravousanos. Then, in 2017, the Chinese government introduced regulations on money leaving the country and the Australian government doubled stamp duty for foreign buyers to 8 per cent.

In September, research from Chinese property portal Juwai estimated that Chinese investment in Australian property fell nearly 27 per cent in 2017. The international prime market share now sits at about 30 per cent, says Caravousanos. In the Upper North Shores, opportunists can expect post-auction discounts of 20 per cent, he adds.

Three-bedroom home in Cremorne, A$1.2m
Three-bedroom home in Cremorne, A$1.2m © Thomas S. Dalhoff

The prime new-build market is also struggling, says Caravousanos, as it “is completely oversupplied”. New developments in the pipeline include the 400-unit One Sydney Park, which will complete in 2020; the 37-unit Essence development in Double Bay; and the 52-unit Edition Residences in Surry Hills. In the 82-unit Crown Residences at One Barangaroo on the harbourfront, which will complete in the first half of 2021, prices start at A$6.9m. The marketing suite launched in May and only 25 per cent of homes have sold so far, says van Tuil, who is marketing the development. She declined to disclose the top sale price, or the listing prices for the more expensive units.

Perhaps it is a wise move in the current climate. Caravousanos anticipates a further price drop of up to 10 per cent in the next 12 months, “then we will probably stagnate there for a few years”.

Buying guide

  • The median house price in Sydney is A$1.1m (US$794,000), according to the Domain House Price Report
  • Sydney’s average prime price per sq ft in June 2018 was A$1,047, according to Savills World Research
  • International buyers have to be resident in Australia. Investor visas (known as 188c), which allow foreigners to purchase a single residential dwelling, can be purchased by making $5m of investments in schemes endorsed by the Australian government

What you can buy for . . .

A$1.1m A two-bedroom apartment in One Sydney Park

A$2m A two-bedroom apartment in Double Bay’s Essence development

A$5m A six-bedroom house in Dover Heights

More homes at

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