Low rates and high prices in Sydney
It seems that price growth in Sydney is simply refusing to slow down, with many property pundits pointing the finger at low interest rates. So how will rates dictate future price growth in the NSW capital?
Recent prices in Sydney show the property market is “out of control”, Todd Hunter, founder and director of wHeregroup. He attributes this to the record low interest rates which are continuing to stick around, but he sees things changing when they eventually do start to move north.
“And when people hear about Sydney performing, they just want to jump on the bandwagon, which pushes prices up even further,” he says.
Despite that, Hunter believes that in the last two years lots of people have already purchased, which also takes a lot of buyers out of marketplace.
“If they have done it already, then by pure fact of numbers I think you will see a slowdown in that respect,” he says.
For AMP’s Shane Oliver, in the short term, low interest rates point to further gains in home prices, not just in Sydney but nationally.
“However, this is likely to be constrained by the economic environment and the impact of tougher prudential scrutiny of bank lending by APRA,” he says.
In the next 12 months he believes home prices in Sydney are likely to average more than 5% growth, as it is a key beneficiary of the post-mining boom rebalancing.
Meanwhile, Terry Ryder, director of Hotspotting.com.au, believes there are significant factors besides low interest rates which are responsible for Sydney’s increasing prices.
“If interest rates were the main factor, then everywhere would be booming, because we have low interest rates everywhere,” he says.
“Really, the only booming place in Australia is Sydney, and it has a lot to do with local reasons. The NSW economy is much stronger than it was.”
Indeed, according to the latest CommSec State of the States
report, NSW has retained the top spot as the best-performing economy.
In particular, this is due to its growing population in recent years and the fact that home construction is responding to the shortage of accommodation.
“NSW looks to be well supported by home construction and infrastructure spending over 2015,” says the report.
There was further good news in the Deloitte Access Economics Business Outlook
report, which claims that the falling Australian dollar is positive for the state’s manufacturing, tourism and farm sectors.
Furthermore, growth in the retail trade is continuing to outperform other areas and is being led by strong sales at household goods retailers.
“Car sales in NSW are also up and are similarly outperforming the national picture,” says the report.
“Meanwhile, lower petrol prices, low interest rates and strong house price growth are giving the state’s consumers (and particularly mortgage holders) a pay rise.”
Finally, the $6bn Barangaroo development should support a high level of activity in the state’s commercial construction sector in the next two years.
Land snapped up in Sydney’s southwest
Believe it or not, agents in Sydney’s southwest have reported seeing people camp overnight on blocks or at sales offices in order to be the first to purchase big blocks of land, according to the latest Herron Todd White report.
In particular, it seems to be new infrastructure that’s attracting buyers. Areas such as Edmondson Park, Leppington, Carnes Hill and Glenfield are located where the South West Link and the planned Badgerys Creek Airport will offer ease of accessibility to the region and an increase in job growth.
Standard block sizes of between 300m and 450m are usually sold for $300,000–$450,000, and the high demand has seen much of the land that has been released sold early in the presale period.
Specifically, there has been a large amount of land released in the local council areas of Liverpool, Campbelltown and Camden (on the fringe of the metropolitan area) in the past five years as part of the South West Growth Corridor.
SUBURB TO WATCH
Orange: Diverse regional area with potential
You might know it only as the birthplace of Australia’s most famous bush poet, Banjo Patterson. However, there is a lot more happening in Orange that makes it worth watching right now.
It may be located 254km west of Sydney, but Orange itself has a diverse economy and plenty of opportunities for employment.
In particular, the Cadia gold mine is an open-cut gold and copper mine located 20km south of Orange. It is a major employer in the region.
Overall, Orange’s main industries include fruit growing, wine production, tourism and mining. In addition to the wide range of schools in the region, it also has campuses of Charles Sturt University and TAFE.
There are also three major shopping centres in Orange, including Orange City Centre, The Summer Centre and Orange Grove Homemakers Centre.
Furthermore, Orange Airport is currently undergoing an $18.9m upgrade that’s due to be completed this year.
According to OnTheHouse.com.au, houses in Orange are projected to experience 6% per annum growth over the next eight years, which is very healthy, particularly for regional NSW. It’s also important to recognise that there is a big disparity between Orange’s cheapest properties (around $120,000) and most expensive homes (over $600,000).
There are brick cottages located on Byng Street and Lords Place which are ideal for families. They are very close to cafes, restaurants and schools. These charming two- or three-bedroom homes may exceed the suburb’s median price, but the location justifies it.
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