In February, Australia reopened its borders to international travel.
We believe it could have real implications for the local property market here on Sydney’s Upper North Shore. Here’s how.
How the Upper North Shore fared during COVID-19
Remarkably, Australia’s property market recorded record growth over 2021 and early 2022 even though our borders were closed to the world (and even sometimes to other States).
In the 12 months to 31 March 2022, CoreLogic data shows the median national property price lifted an incredible 21.3%.
Here on the Upper North Shore, we’ve seen some suburbs and property types outperform even that impressive figure. For instance, REA data reveals that in Killara, the median house price lifted 32.1% to $4.2 million in the year to 28 February. Further north in Berowra, the median house price rose 29.6% over the same period of time.
One of the factors in the North Shore’s favour has been COVID-19 forcing people to rethink their priorities when it comes to property. Given that a lot of us were spending a lot more time at home, that often meant looking for a place that gave us more room to move.
With abundant green space, bushland and substantial blocks of land, our area – from Chatswood north to the Hawkesbury River – has stood out as one of the main beneficiaries of that trend.
Australia seen as a safe haven
At the same time, the Upper North Shore has always benefitted from new arrivals and overseas buyers. After all, in many people’s eyes, Ku-Ring-Gai and Hornsby Shire represent everything that’s great about Australia’s way of life.
While ex-pat buyers have been prominent in our local area over the last year and a half, we expect that we’ll also start seeing the return of other overseas buyers. With so much uncertainty in the world right now, Australia’s status as a safe and stable place free from trouble can also only help in this regard.
The effects of this trend will most obviously be seen in the prestige market, which always grabs the headlines. However, we expect that it will also filter down through other market segments too.
Rental market to improve
While unprecedented price rises may have made the past two years a great time to be a homeowner, many property investors have had a bumpier ride.
Vacancy rates immediately spiked in the wake of the COVID-19 pandemic, with the Upper North Shore vacancy rate peaking at 5.3% in May 2020, according to SQM. The Upper North Shore’s median house rent also declined from $809 to $750 between March 2020 and October 2020.
What has gone largely unnoticed though is that rents have been rising steadily ever since, while the vacancy rate has been shrinking. As of April 2022, the median rent for Upper North Shore houses was $881 – some 17.5% above the October 2020 low. Meanwhile, the local vacancy rate has more than halved to stand at just 2.6% today.
Increased migration should lead to higher rental demand and we believe investors should expect rents to rise over the course of the next year.
Open borders a two-way street
One factor that is less talked about is that open borders are likely to be a two-way street. What that means, is that a lot of people are likely to prioritise overseas travel again. This is likely to have a real impact on the downsizer market segment. We know a lot of people at this phase in life have been holding off listing their homes, or even holding off on retiring because they haven’t been able to live the lifestyle they want. With borders open and travel again on the cards, we’re likely to see more people take this step – that means potentially more family homes coming onto the market, as well as increased demand for downsizer-friendly properties, especially luxury apartments.
Another trend that could be impacted by open borders, is the incredible demand for renovation. With no option for international travel, it seems as though a lot of people have redirected their finances into doing up their own homes. This could potentially start to lose momentum as other options for spending open up.
Other factors at play in 2022
Speaking of which, there are likely to be a number of other factors at play this year that have an even greater impact on the property market than open borders. One will be inflation, especially when it comes to construction costs, which could put a dampener on people’s renovation plans.
This is likely to be accompanied by rising interest rates, which in turn could affect people’s capacities to borrow.
At the same time, the signs are that Australia’s economy is roaring back to life with low unemployment, high export figures and even, potentially, wage rises. When you combine these factors, it’s likely they will offset rising interest rates and higher inflation, at least to some extent.
Open borders should be welcome news for people living in Ku-Ring-Gai and Hornsby.
We expect that, even as Sydney’s property market recalibrates over 2022, our area will continue to overperform the median.
If you’re interested in buying or selling in Ku-Ring-Gai or Hornsby Shore, get in touch.