Heat coming out of V-shaped property market recovery
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Heat coming out of V-shaped property market recovery

Sydney and Melbourne are cooling but Perth, Brisbane and Adelaide are still rocketing, according to new price data

By Bronwyn Allen
Tue, Dec 5, 2023 10:11amGrey Clock 2 min

The V-shaped recovery in Australia’s property market was interrupted in November, with CoreLogic’s national home value index recording its smallest monthly gain since the new growth cycle began in February. Melbourne home values dipped by 0.1% and Sydney’s growth rate slowed sharply to 0.3%, representing a significant cooling in Australia’s two biggest property markets, and dragging down the national home value growth rate to 0.6%.

Factors taking the heat out of Melbourne and Sydney include affordability constraints, rising interest rates, pessimistic consumer sentiment and a higher number of homes for sale. CoreLogic Research Director Tim Lawless said market weakness was more pronounced in the upper price brackets. “The more expensive end of the market tends to lead the cycles in these cities. As borrowing capacity reduces, we may be seeing more demand deflected towards lower housing price points, with the broad middle of the market now recording the strongest rate of growth in Sydney and Melbourne.”

Meantime, the Perth, Brisbane and Adelaide markets continue to rise strongly. Perth dwelling values surged by 1.9% in November the largest monthly gain since March 2021 while Brisbane moved 1.3% higher and Adelaide went up 1.2%. Mr Lawless said buyer demand was strong amid low levels of supply. “This imbalance between available supply and demonstrated demand is keeping strong upwards pressure on housing values across these markets, despite the downside factors leading to weaker housing market conditions across the lower eastern seaboard,” Mr Lawless said.

Canberra recorded subdued growth at 0.5%, Hobart values fell 0.1% and Darwin values fell 0.3% last month. The supply of homes for sale began increasing over winter, which is seasonally unusual, leading to stock levels above five-year averages in Hobart, Canberra, Melbourne and Sydney today.“In these cities, market conditions are now in favour of buyers as higher stock levels provide more choice, less urgency and greater opportunities to negotiate,” Mr Lawless said.

“The same can’t be said for Perth, Brisbane and Adelaide, where advertised stock levels remain remarkably low. Perth listings are nearly 40% below their five-year average for this time of the year, while listings are more than 30% below average in Brisbane and Adelaide. Unsurprisingly, these cities are continuing to show a consistently high rate of growth amid strong selling conditions.”

Perth, Brisbane and Sydney have been the strongest performing capital city markets of 2023 with home values up 13.6%, 11.9% and 11.3%, respectively. Regional markets have lagged behind the capital cities this year, with the strongest gains seen in regional South Australia, up 9.6%, regional Queensland, up 7.9% and regional Western Australia, up 7%. Overall, regional property prices remain 1.8% below their historical peak recorded at the top of the last cycle in May 2022.

Mr Lawless said it would be “a very different housing market” in 2024. It is looking increasingly clear the housing market is moving through a new inflection point, with the rate of growth in home values becoming more diverse, but generally weakening,he said. The prospect of higher interest rates for longer has likely dampened buyer confidence as well. “We don’t expect to see a material lift in housing activity until interest rates reduce, and that isn’t likely until the second half of next year.”



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They Were About to Move In When the Ocean Almost Washed Away Their New Home

Gail and Ron Fink’s property in Jupiter Inlet Colony sustained major damage during an unusually windy day. ‘The whole backyard is shot. All the landscaping is gone.’

By E.B. SOLOMONT
Fri, Feb 23, 2024 8 min

Gail and Ron Fink weren’t home the day the ocean swallowed their backyard.

The Florida couple, who are in their 70s, were a few miles away on Feb. 6—an unusually blustery day in the Sunshine State—as waves pounded their beachfront property in Jupiter Inlet Colony, sweeping sand, dirt and trees out to sea. When it was all over, the Finks’ newly-built, roughly 10,000-square-foot home was intact; so too was their free-form swimming pool, improbably balanced on exposed concrete-and-steel pilings.

“That’s what saved the whole thing,” said Ron, founder of an air- and-water purification company. “The pilings are holding up the house and pool.”

Gail and Ron Fink recently finished building a roughly 10,000-square-foot home. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Drone footage and pictures from local photographers and the Finks’ builder show the severity of the destruction, which left their pool suspended in the air, with pipes protruding from the earth. Town officials said erosion claimed 7 to 10 feet of sand and created steep drop-offs in front of about half-dozen homes, including one belonging to Kid Rock , the rapper-turned-country rocker, who paid $3.2 million for the property in 2012. Conair heiress Babe Rizzuto also sustained damage to her property down the street, which she bought for $6.3 million in 2015 and currently has listed for $22.5 million, according to Zillow.  Neither responded to requests for comment.

But the Finks house, located just past the end of a granite revetment wall—a kind of sea wall—bore the brunt of the heavy wind and waves.

 

“The whole backyard is shot. All the landscaping is gone,” said Ron. Also gone are fully matured Palm trees and an ipe-wood deck. “It’s out floating in the ocean someplace.” Ron is self-insured and the repair work will be quite expensive. undefined

A New Jersey native, Ron is an engineer by training who worked at nuclear-testing sites in California and Nevada before moving to Florida in the 1980s. He is the founder of RGF Environmental Group, which makes air- water-and food-purification systems.

For almost 40 years, the Finks—who have three adult children and eight grandchildren—have lived in Admirals Cove, a gated community in Jupiter about 5 miles from their new house. They paid $180,000 for the Admirals Cove lot in 1987 and built a roughly 6,000-square-foot house, Ron said. The Finks also own homes in the Cayman Islands and Bahamas.

Until now, the Finks have lived in Admirals Cove, about 5 miles from their new house. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Ron said they began looking for property in Jupiter Inlet Cove years ago. “It’s a neat place, just a closed little colony right on the ocean, low key and quiet,” he said.

About 20 miles north of Palm Beach, Jupiter Inlet Colony is at the southern tip of Jupiter Island. The town, founded around 1959, has approximately 240 homes and is surrounded on three sides by water—the Atlantic Ocean, Jupiter Inlet and the Intracoastal Waterway. Long a destination for wealthy homeowners, homes in Jupiter Inlet Colony tend to trade for between $2 million and $5 million, although one sold for $18.6 million in January, according to real-estate brokerage Redfin. Last year, a home on the Intracoastal sold for $21.4 million, a record for the town.

In 2020, the Finks paid $4.9 million for a vacant beachfront lot and subsequently built a coastal-style house with a copper-and shake-style roof, covered loggia, pool and outdoor fire pit. “You know, it’s kind of a dream home,” Ron said. “We have built quite a few homes, but this is the end of the line for us, hopefully the last one.”

He said the property originally belonged to the singer Perry Como, one of the town’s first residents. A prior owner demolished Como’s house, and when the Finks bought it, there were concrete-and-steel pilings sticking out of the ground.

Ron Fink said he never removed about 60 pilings, he simply added roughly 30 more. “Now I’m glad I did,” he said. (Pilings are based on the design of a house, so Ron retained some pilings that he didn’t necessarily need.)

John Melhorn of design-build firm Thomas Melhorn, which built the house, said the Finks were a final review away from obtaining a certificate of occupancy when the backyard was destroyed. “They were right there at the goal line,” he said.

The Finks’ house and pool are standing on about 90 concrete-and-steel pilings. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Melhorn said the erosion began in late October amid unusually high winds and ocean swell. During the first week of February, sand beneath a row of sea grapes that stabilized the dunes between the house and ocean began to wash away. By the evening of Feb. 6, the plantings disappeared. The yard was gone by the next morning.

Melhorn said a pre-existing, low wall between the ocean and house—described as a cinder-block retaining wall on land surveys—also washed away, as did a walkway and steps to the beach. But he said the 2-foot-high wall was less of a retaining wall and more like a curb between the street and sidewalk. In this case, a prior owner used it to hold sea grapes back from encroaching on the property. The Finks replaced the wall with decorative stone, now lost to the ocean. An outdoor fire pit is still there, cantilevered over the ocean. “We tried to pull as many things out as we saw the erosion coming, but we lost a lot,” Melhorn said.

In Florida, erosion is increasing because of more frequent, more severe storms and sea-level rise, said Cheryl Hapke, a research professor at the University of South Florida and the chair of the Florida Coastal Mapping Program. But she said it isn’t just hurricane-level storms that cause major damage. “One thing I have found about barrier islands [like Jupiter Inlet Colony] is that sometimes a series of smaller events can have as big an impact as a major hurricane,” she said. “But people get caught off guard. It’s something they don’t think of.”

In Jupiter Inlet Colony, longtime residents said this month’s erosion is the worst the area has seen in years, possibly ever.

Mayor Ed Hocevar, who has lived there for 17 years, said it has been a particularly cool and challenging winter with an abnormal number of Nor’easters. On Feb. 6, local news channels warned of high winds, with gusts between 40 and 50 miles an hour. (There were also reports of an earthquake off the coast that week, causing high waves.)

Since the 1980s, Jupiter Inlet Colony has had a granite rock revetment wall that extends from the northern end of the community past 11 oceanfront homes. “But we’ve got 28 homes along the beachfront, so it isn’t complete,” Hocevar said. “Where the wall ended is where the significant damage occurred.” Hocevar said he doesn’t know why the wall wasn’t completed, although local lore is that homeowners building the wall ran out of money.

Last week, the town hired a local mining company to bring in 7,000 tons of sand to replace what washed away. Hocevar said it would cost about $500,000, which will come out of the town’s reserve fund. Long term, he said, extending the revetment wall isn’t a strong possibility.

Hapke, the coastal geology expert, said that in recent decades, sea walls and hardened structures have fallen out of favor as scientists discovered they are detrimental to the environment around them. “Storm water wants to flow, so it will redirect water to the area without a sea wall,” she said, adding that the most ideal long-term solution is to move homes away from the coastline.

 

Hocevar, 67, who has been mayor of Jupiter Inlet Colony for about a month, said the town is working closely with the Department of Environmental Protection on its response. He said the DEP’s recommendation, should erosion like this occur again, is to bring in more sand. Hocevar emphasised that the community is rallying together. “Think about it as a fortress and your wall has been breached,” he said. “You want to protect your neighbourhood and that’s what we’re trying to do here.”

Holly Meyer Lucas of Compass, who represented the seller when the Finks purchased their property, said Jupiter Inlet Colony is a “special little enclave” where sales exploded during Covid. “Listings sell after a day or sell off-market,” she said.

Lucas said the consensus among local real-estate agents is that property values will hold, despite the erosion. “I think this is a really rare, weird, fluky event,” she said. “I’ve sold everywhere up and down the coast and I’ve never heard of anything like this.”

The couple were close to getting their certificate of occupancy for the newly-built home. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

Babe Rizzuto, whose house is two doors down from the Finks, listed her house for $24.5 million in December 2023 and cut the price to $22.5 million on Feb. 6, according to Zillow.

“She’s going to continue to sell,” said Milla Russo of Illustrated Properties, who is marketing the property with her husband, Andrew Russo. “Even though the timing isn’t great, it is what it is.”

Russo said there has been erosion in the past, and during hurricanes residents of Jupiter Inlet Colony are the first in the area to evacuate. But in general, people are not preoccupied with the weather. “Maybe because we live here, when the hurricanes come, we all have hurricane parties. We go to people’s homes and we barbecue and grill. Of course we’re careful and we lock up and all that, but weather is weather,” she said. “We’ve never been terribly scared.”

(The Russos were also involved in selling the Fink property. However, in 2020 the closing agent on the deal, Florida-based Eavenson, Fraser & Lunsford, PLLC, sued Milla Russo and Illustrated Properties as part of a commission dispute. The seller, Michael Cantor’s Range Road Developers, was named as a defendant and cross-plaintiff in the suit, in which a judge ruled in favor of Eavenson, court records show. Milla Russo declined to comment on the suit. Eavenson declined to comment beyond the judge’s findings and Cantor did not respond to requests for comment.)

Ron was also matter-of-fact about the state of beachfront living. Bring a life jacket, he jokingly told a photographer who inquired last week about taking his picture.

However, the Finks are facing weeks of costly repairs. Although the town is bringing in sand to replace the decimated beachfront, the couple is self-insured and will be on the hook for the cost of rebuilding. Several major home insurers have pulled out of Florida, and Ron said insurance on the house would have cost $100,000 a year. Now, he estimated they could face about $1 million worth of repair work. “We gotta eat it,” he said.

The couple, who was supposed to move into the house this month, has put those plans on hold—for now. An engineer recently inspected the property and deemed the house safe, Ron said. “We’re doing wallpaper today,” he said. “We can put it back together again.” The patio and pool area, meanwhile, are roped off while the area underneath is backfilled with sand.

Ron said being near the ocean makes it worthwhile. “I just love the ocean, we both do. It’s important to us,” he said. “It isn’t easy to look at, but I’ve been through a lot worse.”

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