Sydney’s been tipped for a resurgence for so long, it’s almost strange to think that its boom may have been and gone. However, it seems that this might well be the case.
“Sydney’s been the best performer over the last year,” says Cameron Kusher, senior research analyst at RP Data. “Values are up 2.1%. Still, when you take into account that inflation’s 3.3%, values have come back in real terms.”
Kusher points out that units have been leading the charge, with unit values increasing by 3.5% citywide in the last year; houses, meanwhile, have only increased by 1.5%.
“Relatively speaking, that’s quite a large increase in unit values compared to houses,” adds Kusher. The low citywide average hides significant variations from suburb to suburb, however. Figures from RP Data show that the city’s best performers experienced growth of well over 40% in the last year, while the worst fell by more than 30%. Balmain East topped the charts for houses, with values increasing by 47.4% to an average of $2.1m. Little Bay was the top performer for units, with the median value increasing by 42.5% to $915,000.
“For houses, most of the suburbs listed are all quite close to the city except for the two suburbs on the Central Coast (Brooklyn and Wyee) and Church Point,” says Kusher. “Just like the results for houses, within the unit market most of the best performing suburbs are quite close to the city centre.”
Nevertheless, the sluggish conditions of the overall Australian housing market are putting a general dampener on market activity and growth in Sydney. Stock levels are at ‘above average’ levels, with RP Data reporting that there were 71,852 properties on the market in NSW at 8 May – compared to 55,830 last May. Sales remain subdued too, with Sydney’s auction clearance rate for the same weekend standing at just 52.8%.
PRDnationwide research analyst Oded Reuveni Etzioni expects activity levels to remain subdued in the short term. “Overall, metropolitan Sydney experienced a marginal decline in price since the beginning of the year, but remains in the black on a year-on-year basis,” says Etzioni. “Activity is below the normal levels for this time of the year, although prices in the metropolitan area generally hold firm, with many vendors sitting on the sidelines until their desired price can be achieved.”
Kusher agrees that values should hold firm despite the slowdown in activity.
“We’ll definitely see a slowdown in Sydney, but it’s important to remember that, after the correction following the 2001–2003 boom, values went nowhere for five-and-a-half years,” he says. “It has seen a bit of a run-up in prices over the last couple of years, but I don’t expect to see significant falls following that. I don’t think we’re going to see the same kind of correction that we’ve seen in Brisbane and Perth.”
Sydney’s chronic lack of supply will also assist in keeping prices stable. Kusher points out that nowhere near enough housing development has been approved – partly due to government delays and partly due to financing.
What development is happening is largely infill, too, and Kusher thinks this will continue.
“I really think we’re going to head down the path of Sydney becoming denser, because it’s quickly running out of room,” he says. “It’s surrounded by national parks on all sides, so there’s only so far it can extend. Also, those who rent close to the city probably aren’t going to be prepared to move out 20km or 30km from the city. They’ve become accustomed to their lifestyle, so townhouses or terrace homes are going to be the more affordable compromise for those people.”
While this might be unpopular with local residents in many Sydney suburbs, it’s also potentially good news for investors looking for an affordable way into the Sydney market.
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