Nationwide property slowdown could affect Sydney’s growth
Over 2017/18, Sydney is poised to be the best-performing state in the country both in terms of the economy and the residential market, according to BIS Shrapnel’s senior economist, Richard Robinson.
Non-mining investments are soaring with the mining downturn, and the employment rate continues to rise with the upswing of the tourism and manufacturing sectors.
In fact, NSW is considered to have the best short-to-medium-term prospects among all the states – its economic and population growth rates are anticipated to surpass the national average.
These factors have contributed to the property market’s strength in terms of demand, with increased construction expected to cover the need for supply before NSW is dragged down by the drop in property markets nationally.
“The strength of the labour market, increases in population and buoyant property prices have driven (and will continue to drive) solid growth in household spending,” Robinson says.
For buyers, apartments are the big thing. The ABS indicates that unit approvals have soared significantly in NSW, while such approvals have been limited in other states.
“The NSW boom is propped up by the high-density apartment market,” affirms Chris Johnson, CEO of Urban Taskforce.
Home values rise with low supply
CoreLogic’s head of research, Cameron Kusher, says the number of property listings has begun falling, with fewer new listings in the year to November 2016. The number of auctions in 2016 was also 25.7% lower than in 2015.
There’s a silver lining, though, as the limited auction volume has led to an increase in clearance rates – Sydney’s rates have consistently remained above 75% since the latter half of July 2016.
However, homebuyers may find it progressively more difficult to secure the funds needed for a purchase.
“[In 2017], lenders will absolutely become more prudent and fussy on what they lend on,” says Douglas Driscoll, CEO of Starr Partners. “The International Monetary Fund believes property affordability in Australia is an issue and homeowners are stretching themselves too far.”
Driscoll also says the number of listings will continue to drop, pushing demand even higher. He points to investors as significant instigators of the property shortage since they are the primary purchasers of nearly half the properties in Sydney, causing even second and third home buyers to lose out.
This means the government may be pushed to approve the construction of more granny flats. Furthermore, for existing homeowners, renos are becoming a more favourable and affordable option than buying a new home.
Regional areas could get more attention
Given space and affordability issues in the capital, the growing popularity of working from home could inspire buyers to seek out properties beyond the Sydney CBD.
“In 2017, I think we will see more people move to areas like the Hawkesbury District and Central Coast, particularly families, because of the ability to work from home or elsewhere outside of a physical office,” Driscoll states.
“Sydney is vying to become the startup capital of the southern hemisphere. We’ll see even more tech start-ups popping up on Sydney’s fringe in places like the Central Coast, and similar areas that boast a more relaxed pace of life.”
This transition will be assisted by the completion of the North West Rail Link, which simplifies the commute from The Hills and Hawkesbury. Suburbs such as Marsden Park are also fast becoming commercial centres, inspiring the migration of offices there.
SUBURB TO WATCH
Panania: Inner southwest suburb offers an affordable alternative
Within the southwest Sydney region, Panania is a top suburb to watch in 2017, according to Starr Partners CEO Douglas Driscoll.
It has experienced steady growth over the past five years, showing long-term investment potential. The median house price was below $1m as of November 2016, so now may be a good time to buy into the market.
Being less than an hour away from the CBD also adds to Panania’s appeal, and this suburb is highly accessible as the M5 motorway makes up its northern boundary.
The local Business Chamber is one of Panania’s main drawcards, and there is a shopping hub near the railway station in the suburb. Elderly residents have access to a senior citizen centre as well.
Duplexes dominate the property market in Panania, replacing the old fibro homes.
Can you afford to buy in this suburb? Find out how much you can borrow