Entry-level buyers cut off from owning anything within 50km of CBD

Limited to arc stretching from Gosford to Penrith and Camden.

45 per cent of Sydney buyers are currently investors

Sydney’s median house price rose 3.6 per cent over March quarter

YOU won’t find it on any map.

But to first-home buyers it is as real as the former Berlin Wall — an impregnable fortress of market forces circling Sydney and denying thousands of young couples the Australian dream of a humble home within driving distance to jobs and the CBD.

Sydney’s great wall of unaffordability stretches from the Palm Beach in the north, across to Brooklyn, Berowra, around the sprawling North West to Windsor Downs and down through Berkshire Park and Parramatta.

Compiled by comparing median sale prices over the past 12 months with current listings the barrier to first home ownership then tracks south east through Greenacre, Beverly Hills before jutting back out to Padstow, Picnic Point and around the Sutherland Shire.

And the fortress is expanding.

media_camera Auctions across the city are well-attended and competitive.

A search on realestate.com.au found as few as 222 listings in Sydney for stand alone, minimum two-bedroom homes genuinely considered affordable for entry-level first home buyers.

These were on the fringes, once far outside the great wall of unaffordability, at suburbs such as St Marys, Claremont Meadows, Colyton and South Penrith.

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Analysis of Mortgage Choice, Australian Bureau of Statistics (ABS) and Real Estate Institute of NSW (REINSW) data reveals the average first homebuyer are a couple, aged 33, with one-in-three having a small child.

When they do get a toehold on the property ladder, the ABS cites the average first homebuyer’s property is worth $393,000 with a mortgage of $279,000.

But that’s nationally. Sydney’s property market is a different beast altogether and this week’s record interest rate cut will only provoke it further.

media_camera Sydney’s great wall of unaffordability is bound by these suburbs.

Mortgage Choice corporate affairs head Jessica Darnbrough said 62 per cent of first home buyers were a couple, 86 per cent were aged under 40 and had a combined household income of between $80,000 and $140,000 a year.

Almost half, or 44.3 per cent, save for three or more years and about one-in-four couples save more than five years to scrape together a deposit of about six to 10 per cent of the value of a property.

Ms Darnbrough said 47.6 per cent of couples contributed less than 10 per cent of the deposit, requiring mortgage insurance or family guarantors.

Based on an interest rate of 4.5 per cent it puts first home buyers roughly into three bands.

The first is the true entry-level homebuyer who can borrow up to $550,000.

These are effectively cut off from owning anything closer to the city than the arc stretching from Gosford around to Penrith and south to Camden.

media_camera A property at Camden Park, a fringe suburb still affordable for first-home buyers.

The mid-range first home buyers are couples who can borrow $800,000 and bid for 590 properties listed on realestate.com.au a little closer to the wall of unaffordability.

Then there are those on a combined income of about $140,000 who can shop around with pre-approved finance of up to $1 million and snipe at listings at Normanhurst, North Rocks or even Erskineville where the median sale price in the past 12 months was $987,500 according to RPData.

REINSW president Malcolm Gunning said first home buyers made up only a small percentage of the market, leaving them vulnerable to market forces and inflated prices.

``The first homebuyer market only makes up 7.5 per cent of the market compared to 45 per cent of the investor’s market,’’ he said.

``That’s concerning because they’re knocked out of the market because of investors.’’

media_camera First-home buyers Arjun and Jen Ganesh with daughter Arya in their unit at Summer Hill. Picture: John Fotiadis

He said the state government’s decision to limit stamp duty exemptions and the first homebuyer’s grant of $15,000 to new builds and land packages had worked to stimulate the building industry ``to some extent’’.

``But what’s happening is generation `I’, many are not that interested in buying (new) real estate, they want that flexibility with their money, the flexibility to change jobs or move overseas.

``What we would like to see is first home buyers buying older, established properties and value-up with DIY.

``The opportunity should be to pick up those older properties, 1950s and 60s builds, and do them up.

``We don’t need the stimulation in new builds because the investors are picking them up.’’

Like thousands of first home buyers, young professionals Jennifer and Arjun Ganesh, aged 33 and 34, started looking 12 months ago with a few cursory glances at real estate websites.

But when daughter Arya came along eight months ago things stepped up a notch and they were determined to find something more suitable than their crowded, rented, two bedroom, third floor unit at Summer Hill.

media_camera Property on the Central Coast is becoming increasingly attractive to entry-level buyers.

For the past four months the nurse and IT consultant spent almost every weekend attending auctions and open houses looking for their slice of suburbia.

“Originally we were looking quite close to Sydney at places like Lane Cove,” Mrs Ganesh said.

“We wanted a house but we knew we couldn’t afford a house so we were looking for a ground floor unit with a court yard but even they were up around $900,000.”

They expanded the search to Hornsby, North Turramurra and even Mount Colah where they made an offer on a house for $750,000 which ended up going for over $1 million.

With a combined income over $140,000 they were given pre-approved finance for $910,000 but decided to look further afield when they made an offer on a house at Normanhurst for $895,000 and were turned down only for it to go for that price at auction.

Instead they made the decision last week to buy a $539,000 three bedroom fibro house at Long Jetty on the Central Coast.

It was a difficult decision because of the commute and the fact most of their friends live in Sydney but financially savvy given the lower repayments and the fact they are walking distance to the beach.

Instead of paying the full 20 per cent deposit they have opted to pay 10 per cent and use the rest of their savings for renovations, which will improve their capital.

“Even on the coast it’s getting prohibitive,” Mrs Ganesh said.

“One house at Berkeley Vale we looked at had eight offers on it and they were still holding open house inspections.”

Apartments used to be the last bastion for first home buyers looking to break into the property market inside Sydney’s great wall.

media_camera Sydney’s apartment market is split into three distinct areas depending on affordability.

But the Real Estate Institute’s Mr Gunning said even they were being priced out of contention.

The REINSW breaks the Sydney unit market into three concentric circles around the CBD.

Mr Gunning said units in the “inner ring” or a 5km radius around the CBD including the lower North Shore, Inner West and Bondi were going for anywhere from $700,000 to $1 million.

He said new apartments in the middle ring, extending from 5km to 25km around the city and encompassing Parramatta, Hurstville, Hornsby and parts of Manly and the North Shore were selling for $750,000.

Meanwhile the outer ring up to 50km from the CBD at Camden, Richmond and Bankstown were regularly going for $500,000 to $600,000 — putting them at the very edge of affordability for entry level first home buyers.

Sydney’s median house price meanwhile continues to charge unabated — up 3.6 per cent over the March quarter to another new record of $914,056.

Median unit prices also increased by 1.2 per cent to reach $609,800 and this week’s Reserve Bank decision to drop the official rate two 2 per cent will make an already difficult situation for first home buyers even worse, according to Sydney University’s real estate expert Dr Danika Wright.

“Many more people will find Sydney unaffordable while others will be frightened out of the market by fears of a property bubble,” Dr Wright said.

media_camera Jacqui Wanset at 144 Kurraba Rd Neutral Bay, which sold property for $4.2 million . Picture: Richard Dobson

FRANTIC BUYERS LEAVE NOTHING IN RESERVE

SYDNEY real estate agents are struggling to keep up with the city’s soaring prices, with homes regularly selling for more than a million dollars over their already lofty reserves.

More than 650 properties are set to go under the hammer today and market analysts predict a record 90 per cent of them will sell at or over reserve.

SQM Research’s Louis Christopher warned the frantic pace of Sydney house price growth made it a “dangerous” time to buy because many house hunters were so desperate they were willing to offer almost any price.

“When prices move up quickly it’s difficult to work out fair value and many buyers overpay,” Mr Christopher said

He said the RBA’s decision to slash the interest rate to a record low this week would further aggravate the situation: “There are already a lot of buyers in the market and they have few properties to choose from. Now they’ll be even more buyers, but the same shortage of homes for sale.”

media_camera This house at 1 Stansell St Gladesville sold for $2.85 million, a whopping $1.1 million over the reserve.

The rapidly rising prices have created confusion among real estate agents when discussing reserve prices with clients.

Cobden and Hayson agent Matthew Hayson said the booming real estate market had made sale prices impossible to predict.

“There’s no way to know just how badly someone will want a property right now and what they’re prepared to pay for it,” Mr Hayson said.

media_camera 20 Wentworth Street, Eastwood sold at auction for $1.89m, $350,000 over the reserve price.

Richardson and Wrench agent Aris Dendrinos said a Campsie property recently sold for $760,000 over its $1.2 million reserve — well above the suburb’s $980,000 median house price.

“Supply and demand is like a powder keg right now and, in some sales, it blows up,” Mr Dendrinos said.

“You can’t plan for these results. Recent sales of comparable properties can’t predict it and there’s no pattern to it.

“They happen because serial bridesmaids are in the market. They’ve been blown out the water at auctions for months and they’ve snapped. They throw realism out the window and bid way beyond what the seller would have accepted.”

Other excessive auction results include a six-bedroom home in Abbottsford which sold for $1.71 million over reserve and a four-bedroom Neutral Bay home that last week sold for $4.2 million — exactly $1 million more than the seller expected when it was first listed.

“We are looking at a very hot market. We had 75 potential buyers through the door on the first open for inspection,” said agent Piers van Hamburg from McGrath Neutral Bay.