The local government area (LGA) of the Shire of Hornsby lies on the northern edge of Sydney’s urban area. Property values in the LGA are very closely tied to the economic success of the county’s largest city. After experiencing very strong price growth, the Sydney property boom is going through a period of correction.
As can be seen in the map below, Sydney’s urban area has started to experience price falls. The attractiveness of property in the Shire of Hornsby has been reduced by the market price correction. It has been one of the worst hit LGAs in the region.
The market for houses in all LGAs around Sydney performed badly 2019 Q3. However, the Shire of Hornsby fared worse than most of its neighbouring LGAs, which all experience price falls.
The market for houses in the Shire of Hornsby showed sales price falls of 6.86 percent during Q3 2019. Neighbouring Northern Beaches to the East saw prices fall 4.29 percent and the Hills Shire to the West saw house sales registering an average price fall of 5.49 percent. Moving north from the Shire of Hornsby, price falls lessen. Central Coast saw price falls of 3.64 percent in Q3 2019. Looking to the North of Central Coast, prices increased during the last quarter as the influence of the Sydney housing market lessens: Lake Macquarie, Cessnock City, and Newcastle City to the north increased by 0.24, 2.58, and 1.49 percent respectively.
House sales volumes in the Shire of Hornsby were comparable to its immediate neighbours. The LGA saw the sale of 157 houses in Q3 2019 compared to 117 sales in the Hills Shire and 123 sales in Northern Beaches . The market was more active in Central Coast, to the north with 356 sales.
The market for units in the Shire of Hornsby also experienced the largest price falls in region during Q3 2019. The average unit sales price fell by 6.42 percent. In comparison, prices fell by 3.29 percent in Northern Beaches and 5 percent in the Hills Shire. The market for units fared better in Central Coast, where prices fell by 0.56 percent. Closer to the centre of Sydney, Ku-ring-gai saw unit prices rise by 0.79 percent.
Unit sales volumes were low in the areas that showed better price performance, however: 23 sales in Ku-ring-gai and 24 in Central Coast, 35 in the Shire of Hornsby, and 10 units in the Hills Shire. Only Northern Beaches showed respectable unit sales levels with 109 units sold during the quarter.
The demand for houses in the LGA is a great deal higher than the average rate of sales for all local government areas in Australia, while the sales rate for units is slightly lower than the national average. Demand for houses for rent is a little lower in the area than the national average and the demand for units for rent is considerably lower.
Over the past year, prices for houses have fallen in the LGA by 6.45 percent, while prices for units fell by 6.07 percent. The movement in prices the rental sector was negative for both houses and units with falls of 3.79 and 4.78 percent respectively. Those falls in rent levels were not as steep as the sales prices. In the case of the house rental sector, average yields actually improved by 2.89 percent.
The demand profile, below, shows that four bedroom houses sold in far greater quantities than any other property type and size during 2018 – 2019. Three and five bedroom houses also sold in high volumes.
Interest in units settles on one and two bedroom properties – a size that shows far less demand in the house sale sector.
The first graph below shows the long-term view of the house market in the Shire of Hornsby since the beginning of 2008 for house sales in the top graph and since Q3 2009 for rentals in the bottom graph.
House sales volumes have been volatile, surging and falling with no clear pattern. There is no specific season that can be said to see regular sales volumes rises or falls. However, the trend in house sales volumes has been in overall decline since 2014. The most active quarters in the history of house sales in the Shire of Hornsby saw volumes of 680 houses. In the last quarter, only 160 house sales completed.
House prices peaked in Q3 2017. HtAG analysis expects that sales volume will rise slightly quarter on quarter with steadily lower prices over the next two years.
The rental market shows that the LGA seems to be switching over from a district of home owners to a place for renters. As sales volumes have dropped, house rental volumes have increased strongly to 590 new contracts in the last quarter. The last quarter had good news for those who buy to let because yields increased. However, HtAG foresees a dramatic fall in rent levels over the next two years, which will greatly outstrip the fall in house sale prices. This will result in a steep fall in rental yields in the LGA.
HtAG’s bedroom-level forecasts are currently using a beta model source, so expect these forecasts to be revised once the model is fine-tuned by our data science team.
Price changes in the house market shows that the Shire of Hornsby has been a good place to buy from 2008 to 2017. The LGA’s average property price changes never dipped into negative territory since the beginning of the graph’s timeline but that situation changed dramatically in 2018. Year-on-year price increases for houses stood at 8.83 percent at the beginning of 2017, but by January of the following year, that strong growth evaporated and yearly price changes switched down to a loss of 2.52 percent. That decline increased at the beginning of 2019 with a price fall of 6.45 percent.
HtAG doesn’t see house price changes returning to an increase during the next two years. However, the rate of price falls show slow.
The heatmap of house price changes for the Shire of Hornsby in 2019 Q3 shows no clear pattern. Districts that show heavy price falls neighbour areas that show the strongest price gains. There is no clear pattern to the price falls. So, it cannot be said that one side of the LGA is a better bet for property than another. For example, the steepest price falls in the quarter occurred in the Mount Colah area where prices fell by 7.62 percent. Prices rose by 3.47 percent in the neighbouring Mount Luring-Gai area. The strongest price rises occurred in Galston with a rise of 7.76 percent. Although Galston does not border Mount Colah, the two areas are very close, separated by a very short distance with the district of Hornsby height, which showed price growth of 1.17 percent.
The irregular price performance pattern of these four areas is repeated across the Shire of Hornsby. However, the sales volumes during the quarter were low: 6 house sales in Mount Colah, 4 in Galston, 2 in Mount Kuring-Gai, and 7 in Hornsby Heights. At these low volumes, one heavily discounted bank repossession sales can temporarily depress the average sales price for a district.
The scatter map below shows much more intense sales activity in the south of the LGA and almost no sales in the north. This reflects the varied nature of the Shire of Hornsby with the South forming part of Sydney’s suburbs and the North and West including sparsely populated rural areas.
The market for units in the Shire of Hornsby LGA is not as active as the house markets with only 35 units sold in the last quarter. The rental sector is much more active, with 700 contracts being finalized in the LGA in 2019 Q3.
As with the house sales market, unit sales volumes have been erratic since 2008. The last quarter showed the lowest unit sales volume since Q1 2008. However, the previous quarter saw 91 units sold. Historically, apart from the occasional anomaly, unit sales volumes have been trending lower.
Average unit sales prices peaked in Q4 2017 at A$760,000. Prices have been falling since that date with the average unit sale price in the last quarter registering at A$680,000. HtAG expects that prices will continue to fall over the next two years, but unit sales volumes should improve steadily.
The rental market has expanded continually in the Shire of Hornsby since 2009, reinforcing the LGA’s profile as a rental neighbourhood. The average rent level has been flat at around A$500 since the beginning of 2017. Average rents have dipped slightly to A$490 over the past year and HtAG expects those levels to drop a little further to A$80 over the next two years. HtAG also believes that rental volumes will dip slightly from its peak of 700 rental contracts in the last quarter down to about 61 in Q4 2021.
The fall in rent levels in the unit sector will be a lot less dramatic than the fall in rent levels in the housing sector over the next two years. As unit sales prices are expected to fall at a faster rate than rent levels, the next two years should see rent yields rise in the unit sector.
The price change graph for units has a very similar trend to the graph for house price changes in the LGA. This has been a very good property sector for investors looking for capital growth all the way from 2008 up to the beginning of 2017. Events during 2017 took price changes into negative territory. Year-on-year prices for units rose by 7.91 percent at the beginning of 2017 but unit prices fell by 1.33 percent in the year to January 2018.
The falling price trend continued into 2019 and HtAG predicts that prices will continue to fall over the next two years, though at a gradually decreasing rate.
The heatmap of unit sales in the Shire of Hornsby shows great price change variations within the LGA. However, in most of these areas, unit sales volumes were in single figures. Castle Hill showed the worst price performance with an average sale price fall of 4.67 percent over 6 sales. The highest average unit sales price increase occurred in Wahroonga, but that area had only two sales.
Hornsby and Waitara had the highest unit sales volumes during the past quarter with 16 and 12 unit sales respectively. Prices fell slightly in both of those districts – by 1.55 percent in Hornsby and by 0.94 percent in Waitara.
The scatter plot of unit sales shows that most unit sales occurred in the south of the LGA with none in the larger rural zones in the North. The price bracket of A$700,000 to A$800,000 was more active than any other unit price range.
The property market in the Shire of Hornsby has turned sour since 2017. Whereas once, the LGA was a very good place to invest in property falling valuations and steeply declining rental yields over the next few years make the LGA a place to avoid while the market correction runs its course. The unpredictability of price performance within the LGA is another worrying factor that should discourage professional investors from buying property in the Shire of Hornsby. Those who have a strong local knowledge may be able to read the market a little better because price changes seem to be influenced by the state of individual properties rather than by the status of the areas that they are in.
Local investors who need to focus on property buying within driving distance would be better off exploring nearly districts to the north, such as Lake Macquarie and Cessnock.