How’s the Sydney property market?
Against all the odds and predictions that the Australian property market was going to slow during 2106, Sydney’s housing market is once again chasing to overtake Melbourne to the top of the pile, and it’s looking pretty likely that will happen. In the month of June, it grew by 1.6% taking it to a mindblowing 6.8% for the quarter, a compounded yearly growth rate of 30%. Which is great for investors, but not so good for potential property owners. Where is the balance that will ensure that new buyers will be able to afford homes of their own in this vibrant city?
What is the answer?
Sydney property news is that apartment living in Sydney is becoming the norm – similar to New York City – and house prices will make ownership goal unattainable to first-time buyers, the trend will see more young couples turning to buying apartments, renting homes, or moving further and further out and doing the long commute through Sydney’s famous traffic. That being said, there are many suburbs in the west and south-west with a median house price of $600 000 or less. And the public transport is nearby.
Some financial experts, however, are predicting signs that the Sydney property market may be on the turn to favouring buyers. Based on the fact that houses are taking longer to sell, from 26 days last year to 40 this year, this may be good news for the buyers but has yet to be proven. Others say that the answer is to build more apartment blocks closer to the city centre and central business district, which is where the majority of people want to live.
In reality, Sydney is a world class city plus and with that come the high price tag. Even if the market does slow down there will be a $1 million median, making it even trickier for first-time buyers to get into the market, unless they have $120 000 saved for the deposit. This is very tough when they still have rent and other household payments, and the interest rate not being conducive to saving.
House vs Apartment
In terms of other capital cities, Sydney is lagging behind in housing development. Apartments are showing growth not only in the city centre, but also in the suburbs, and throughout Australia. Strangely, not solely due to the price and space factor, but more Australians are choosing to live in high rise buildings. And then investors also profit by buying up apartments, as the increase in house prices will push up their price up, and so it goes on. Overseas investors also benefit from the lower Australian dollar but are cautious with the stricter credit conditions.
There are always those generally predicting the worse. But is this true in the Sydney housing market? While we know that it is the young would-be home buyers and the middle-income sector who are priced out of the market, perhaps this is due to the banks giving out more and more loans? If the banks pump more and more debt into the market, does it create more buyers who may over-capitalise their portfolio? Is the key factor behind rising Sydney house prices in the last three years accelerating mortgage debt? Is the Sydney property market in a bubble? When is the bubble going to burst? Is the market remaining at high levels due to the northern suburbs and other high priced areas? All valid questions.
Others say that should there be a rush of people unable to afford their interest repayments, and sell their houses in order to survive, there could possibly be a 30 percent fall in the price of houses. But that’s not the proverbial bubble, and the system is not going to crash. To add to this, Australians are building bigger and bigger houses, so the size is pushing up the price:earnings calculations. At some point, though, the level of mortgage debt: income will stabilise and before that happens, the acceleration of mortgage debt will fall, and prices will drop.
Lack of property for sale, Sydney housing market
Some real estate agents are reporting a huge drop in properties for sale, mainly in the expensive inner ring suburbs, with some agents calculating as much as a seventy percent fewer listings than last year, even though some agents are saying it is still a sellers market in the upmarket areas. Winter is historically the quietest time in the Sydney housing market, but the agents figure that there is more to it than just the season. They put it down to a relatively healthy economy and as a result of the incredible buying and selling of last year. Also with the unknown outcome of the elections, and the chance that if Labor gets in, properties could be seen as gold in these wealthy areas.
In the middle and outer areas of Sydney, a more reasonable 10 percent decline has been declared, with more, rather than less, properties on the market in the west and south-west.
Sydney property news is that the market is still in a good place, and that the bubble is not going to burst anytime soon. It’s now just a waiting game.
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