Sydney’s been one of the most robust property markets in Australia over recent months. The combination of a long period of subdued growth and a lack of housing supply has seen demand continue, especially in the more affordable parts of the market.
This has seen Sydney become one of only two capital cities in the country (the other being Canberra) not to post a year-on-year fall in median values. Admittedly, Sydney only saw a 0.5% overall increase in the 12 months to July 2011 – but much of that was fuelled by unit sales, with the median unit value increasing by 2.6% in the same period.
The general consensus was also that, with the extended period of interest rate stability, the long-absent first home buyers were starting to return to the market, potentially adding more fuel to the fire. However, one of the key measures in September’s Budget from the NSW government could put a spanner in the works – namely, restricting the stamp duty exemptions for first home buyers to newly-built or off-the-plan properties only from 1 January 2012 in an attempt to support new construction.
While this is expected to result in a short-term spike in the market, as first home buyers rush to get in under the wire, the longer-term impact is likely to be negative, according to Raine & Horne chief executive Angus Raine.
“Many young buyers looking for inner city units will now have to defer their purchases, and will subsequently put additional strain on infrastructure in Sydney's outer suburbs,” says Raine. "I'd really urge the NSW government to reconsider this budget measure.”
Andrew Wilson, senior economist at Australian Property Monitors, thinks that the impact is being overestimated.
“There might be a small impact in activity levels in that sector of the market, because first we’ve seen a lot of demand satisfied from that group due to the first home owners boost, and because affordability is still an issue. Also, it’s not like they’re being given anything extra – it’s not making houses any cheaper, and therefore it’s not any easier to enter the market.”
The Budget proposals aren’t all negative, though. The government also announced a raft of infrastructure funding centred around transport in Sydney and around the state, including:
$314m to develop the North West Rail Link
$292m to to continue the $2.1 billion South West Rail Link
$103m to expand light rail in central Sydney and the inner west (the Greenway project)
$102m over four years to provide more express rail services
$3m for studies into a bus rapid transit system for the northern beaches.
$3.2bn on road building and upgrading, including $1bn for the Pacific Highway, $570m for the Hunter Expressway and $250m for the Hume Highway.
Regional hospitals will also receive a boost, with $4.7bn earmarked for hospitals and health capital works over the next four years. This includes:
$139m for Campbelltown Macarthur Hospital
$79.8m for Dubbo Base Hospital
$110m for Port Macquarie Base Hospital
Planning for agreed South East Regional Hospital at Bega and Tamworth Regional Referral Hospital
$270m for Wagga Wagga Base Hospital
$47.2m for Prince of Wales Hospital Cancer and Blood Disorders Centre
This infrastructure spending is likely to impact favourably on those areas directly impacted, particularly those regional areas already experiencing capital growth as a result of solid population growth, such as Port Macquarie, Dubbo and Wagga Wagga.
Finally, other welcome news for the property industry is a plan to streamline the planning system, and the previously-announced news that Landcom will be releasing 10,000 lots over the next four years in western Sydney. These measures could well see Sydney’s supply shortfall begin to ease in the coming years. Wilson comments that these measures are essential in ensuring the health of the Sydney property market in future.
“Any initiatives to increase supply are welcome: that’s how I believe we need to address our housing issues,” he comments. “There are significant factors that make that problematic in Sydney. Improving the planning process also has to be part of the answer, in terms of maximising our existing base.
Even so, Wilson highlights that these are all medium-term solutions to a short-term problem: we’re looking at a two-year lag at least before any impact is felt. In the meantime, Sydney’s market is likely to remain under pressure.
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