Market Report New South Wales - (December 2008)


20th March 2009

The western region of Sydney has begun to show signs of growth, thanks to its affordable properties.

"In the current climate buyers don't want to over extend themselves by borrowing $500,000 to buy a $600,000 house. They'd rather borrow $200,000 for a $300,000 home," says Kim Quick from Herron Todd White.

Like many areas of Sydney, the lower end of the market has been flooded by first home buyers looking to collect on Government incentives. For the western regions of Sydney, this has set the $350,000 and below price bracket on fire with ready and willing buyers.

"Agents are basically reporting that they have no stock left after the December 2008 and January 2009 period and as soon as it comes in there is someone there is a buyer ready to snap it up," says Quick.

Quick also says rental returns have been performing well in the west, thanks to high tenant demand and good amenities.

"Supply of rental properties, especially units, in the west of Sydney is still thin and you can buy a unit in Liverpool for $160,000, rent it out at $260-$270 a week and you'll have tenants queuing for your property," says Quick.

Overall growth remain sluggish

Despite strong buying activity in the west, Sydney's overall performance remain slow with house values falling by 1.90% to $560,500 during the three months to December according to Residex. Units managed to make a small gain with median values rising by 0.22% to $395,000.

However, the sluggish performance of the Sydney market is not all bad news according to Pino Tedesco, the director of Metropole Buyers Agency.
 "It is possible that this is one of the best buying opportunities of the past century," Tedesco says.

However, the economic uncertainty over the past year has prompted many investors to sit on their hands.

Tedesco says this 'wait and see' approach to investment has been a contributing factor in the decline of stagnating property growth in Sydney.

"In the last 12 months the average days for property on the market in the Sydney metro region (units and houses) has increased from 40 to 60 days. This indicates that buyer psychology is changing and they have a more considered approach to transactions," says Tedesco.

Key drivers for growth in 2009

Tedesco says there will be three factors that are likely to contribute to an increase in property values for Sydney over the next few years.

"A rise in immigration numbers, first home buyers and improved housing affordability will be the three key elements," says Tedesco.

"The most recent interest rate cute means we're currently experiencing the lowest interest rates in seven years. Since September 2008, the RBA has reduced the cash rate by 3% and with further rate interest cuts by lenders expected over the next year, it is great news for consumers."

Tedesco says the forthcoming rise in affordability will encourage more first home buyers and investors back into the Sydney market.

Where to for investors?

Quick says the next 12 months will call for a long term investment strategy not for short term gains, where the slow and the steady win the race.

"This is the time to buy for your children's prosperity, not for you to flick properties over and brag about at your next dinner party," she says.

Tedesco says investors should be really to swoop when opportunities present themselves.

"Investors should make sure they are cashed up and ready to buy in the near future. They should be getting their properties re-valued and their home loans refinanced. They should also be taking advantage of the banks' competitive rates and negotiate the best deals with them," says Tedesco.

Can you afford to buy in this suburb? Find out how much you can borrow

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