Property News

Emerald city's top end shrugs off interest rate rises

30 October 2006

Naturally enough, one of the main things on most home owners' minds is the likelihood of a November interest rate rise.

A rate rise in two weeks will have a completely different effect on the upper and lower segments of the housing market, and nowhere more so than in Sydney.

Sydney is the city where the bottom end of the market has been hardest hit of all the capitals, while the top end rampages ahead.

Valuer PRP Australia has compiled a list of Sydney sales over $3.5 million, finding that up to July, 24 such homes sold in Woollahra, seven in Mosman and 28 in other local government areas of Sydney, including the northern beaches.

There has been a steady stream of higher priced houses changing hands since then, and last week a few more surfaced.

In harbourside Balmoral Beach, developer Somerset sold a duplex it was holding for future redevelopment for $4.1 million, through Belle Property.

Somerset director Mike Stokes says the Hunter Street site has great development potential, but an owner-occupier made the developer an offer it couldn't refuse.

Somerset paid $3.1 million for the property about a year ago.

On the other side of the harbour a penthouse in Ramsgate Avenue, Bondi, was sold for $5.75 million. Ray White Unlimited principal Ric Serrao, who handled the sale, says there was a premium paid for the position, but he believes that in 18 months the penthouse may be worth $7 million.

"Anything in the $2 million and up range is not interest rate sensitive and that price range also has an overseas audience, who are not bothered by rates either," Serrao says.

"There are people who will pay a premium today to live where they want or to enjoy the lifestyle they want."

The luxury of being able to buy a house where you want is probably not available to most living in Sydney.

Those trying to climb into the million-dollar-plus price bracket, along with those already struggling to pay their current mortgage, will be most affected by a rate rise.

But Re/Max Property Specialists northern beaches principal Nicholas Scarf is optimistic that the disappointing spring period for much of the Sydney housing market will be followed by increased activity in the run-up to Christmas, which is a psychological deadline for those thinking of changing addresses. "A lot of the pundits immediately single out rate rises, but no one thing solely changes the market.

"It is usually a combination of things, from petrol prices to the drought, even the war in Iraq.

"It all becomes a self-fuelling fire. People see little activity at auction, the murmurs start and then everyone is hesitant.

"Vendors get edgy, but I've seen this before. Buyers tend to hold off as they are doing now, but it never lasts."

Scarf says the market never stops completely. "If, for example, a family needs more space, it needs more space."

Scarf says a rate rise may mean that families looks in a different area, or they look on the cheaper side of the street. But they will still do something, he says.

"Sooner or later, people get sick of hesitating and decide to get on with their lives."

Only time - the next six weeks - will tell for most of the Sydney housing market.

Source: The Australian