Northern Beaches: great place to live but you wouldn't want to invest there

Posted on 28/10/2009  

Sydney’s Northern Beaches suburbs often feature in articles about the better (trendier) places to live, yet price-wise the region has been under-performing since a brief boom from 2000 to 2003.

Median house prices are basically flat-lining and unit prices are not much better throughout the Northern Beaches precinct, which includes Mosman, Mona Vale and Manly.

The first thing to acknowledge, of course, is that if you have to live in Sydney, there are fewer better locations than to be 15km from the city heart with water views. City workers can catch a ferry to Circular Quay, while enjoying the café/beach/surf lifestyle at weekends. But research from PRDnationwide clearly shows that owners should not expect their properties to appreciate in value any time soon.

Anyone who bought there prior to 2000 will have enjoyed a good price increase, as did those who were early to buy in the 2000-2003 price boom period. The median price increased from $522,500 in March 2001 to $832,000 in March 2004. This equates to an annual growth rate of 16.8% and probably attracted more people to invest in the area.

But there has been little growth since and the national economic crisis has dented confidence in the area, with the median price declining from $930,500 in March 2008 to $855,000 in March 2009, an 8.1% decline, which makes the boom years look less outstanding. Part of the problem is that house sales fell away during the year, with sales dropping to 1,072 for the six months to March 2009, continuing a volume decline which set in from September 2007.

There is a great range of housing available in the Northern Beaches area, from simple red brick or weatherboard bungalows to modern seaside mansions. PRDnationwide’s report observes that despite the decline in sales volume and median prices, 25% of houses sold for $1.2 million or more, consolidating the reputation of the Northern Beaches as an affluent suburban precinct. Houses priced between $700,000 and $800,000 made up 21% of the sales during the same period.

Despite the increasing number of unit developments over the past 10 years, the heyday of capital gain in this market has long passed. The major growth period was 1999 to 2003, when the median unit price increased 11% per annum to $434,000. Demand for units peaked in 2001, with a record 1,704 units sold in the six months to September 2001.  There has been only moderate growth since - the median unit price rose marginally from $475,000 in March 2008 to $476,000 in March 2009 (only 9% above the level of six years ago).

While half the sales in the Northern Beaches unit market were priced between $300,000 and $500,000, 10% of sales were priced at $800,000 or more.

Unlike other areas, the population of the Northern Beaches seems to be in decline, with Manly recording a 0.7% drop between 2007 and 2008. Pittwater LGA’s population declined 0.1% and only Warringbah LGA recorded an increase, albeit  just 0.5%, between 2007 and 2008.

Could we suggest this may have something to do with the Northern Beaches having some of the highest rents in Sydney? The median rent for a three-bedroom house in Manly is $818 per week, a 17% increase on the previous year. Manly LGA also posted the highest median rent for a two-bedroom unit ($510 per week).

So the Northern Beaches may well be a great place for the predominantly young (average age is 37-41) and affluent to live. But a median unit price increase of 9% since the 2003 boom and a mere 3% increase in median house prices from $832,000 in March 2004 to $855,000 in March 2009 is no real cause for property owners to celebrate.


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