Domain recently published an article about the suburbs with the highest price growth in Sydney over the last 12 months.
They also published a list of suburbs with the worst price growth. From these statistics an interesting observation is apparent. The bordering suburbs of Denham Court with a median house price of $825,000 with 26.60% growth in the past 12 months). With Leppington with a median house price of $675,000 and negative growth of -2.90% in the past 12 months share two vastly different results. How could this be possible?
Denham Court v Leppington
In this article we seek to uncover the possible reasons.
Due to their geographic proximity to one another, its hard to argue that one suburb has geographic superiority over the other. Both share a similar climate, natural features and infrastructure. The answer lies in the non-physical factors which we will explore now.
Simple economic theory around supply and demand comes apparent. These results are only based on actual sales in the past year. Now if we assume that by coincidence all the worst houses in the suburbs sold in the past year. Then the results reflecting the performance of the suburbs are skewed to the bottom end of the market. This idea coincides with a number of sales. The smaller the sample size the larger the variance in the data and the less reflective of the whole population it is. From the same data source (Pricefinder) that Domain gathers its information a comparison of the two suburbs shows the following:
Price Growth and Sales Over Time
It’s important to look at information and statistics in their entirety. As we can see the volume of sales in Denham Court is substantially lower than in Leppington over the past financial year. What we can also see the sales in Denham have been relatively consistent over the past five years. While in Leppington we can see that there has been substantial increase in sales over the past 5 years. This information tells us the larger sample size of Leppington is a more accurately reflection of the results over the previous year. The information is also consistent with Leppington’s large rural blocks being sold to developers creating smaller block house and land packages, as the median House prices has decreased over the past five years.
Local Government Areas
Other factors that could impact price differentiations are legal or regulatory differences. Denham Court is situated in the local government area of Liverpool and Campbelltown and Leppington in the local government area of Camden. Generally, there is not too much difference between councils LEPs and DCPs as every council has set targets in NSW Government strategy plans over the next ten to thirty years. Its from these plans that council base their own housing strategies. The difference in councils processes shouldn’t relate to such a drastic discrepancy in results.
School Catchments provide an invisible line. Where properties on the right side of the line can attract a significant premium within a desirable school catchment. Leppington Public School according to Better Education (which ranks schools across New South Wales) is given a score of 70 and within the 75% percentile which frankly is not very good. Denham Court will receive a new public school with new facilities due at the end of the year. This school has not been trialed or tested. To infer that new facilities result in excellent students is not completely accurate. For buyers to flood and push up the market for a school that hasn’t been completed or its reputation cemented in the community is highly unlikely.
Reputation can play an important factor. Certain stigmas associated with areas can influence price. These stigmas can stem from crime rates, street presentation, and other demographics. Personally I do not know the area that well to comment on its reputation. Although I have read that Denham Court is seen as a more affluent suburb of the south west.
The quality of homes and blocks sizes can vary between suburbs. A quick online search of properties for sale and sold in both suburbs reveals very little difference in house style or quality between suburbs. There are a significant amount of house and land packages available in the area. Willowdale Estate is a recently completed house and land completed by Stockland in Denham Court.
Finally, there is always the possibility that the data is incorrect or incomplete. We can already see discrepancies in Domain’s published information. When compared with the simple search from the same data sources that I had initiated to do a comparison between two suburbs which is in the table above.
To conclude, it seems that the biggest determinate factor between the results of the two suburbs is the volume of sales and the nature of those sales. As Leppington’s rural land is slowly sold and subdivided to create the smaller and more affordable house and land packages. This will add supply to the market putting downward pressure on prices. If Denham Court follows suit with the sale of its large rural lots, we could see the same impact on the price growth in Denham Court as more supply is created in the future