If you purchased a home in Sydney before June 2012, it’s now worth 75% more. If that purchase was made before 2009, it has more than doubled in value.
Just when you thought house prices in the Harbour City couldn’t get any worse, CoreLogic’s latest Home Value Index shows there’s room for further growth. House prices in Sydney are up 18.4% on a year ago, achieving the highest annual growth rate since the 12 months to December 2002 when the housing boom of the early 2000s started to slow.
“The strong growth conditions across Sydney have provided a substantial wealth boost for homeowners; however, the flip side is that housing costs are becoming increasingly out of reach. This is especially true for price-sensitive segments of the market such as first-time buyers and low-income families,” said Tim Lawless, CoreLogic’s head of research.
Sydney’s house prices are almost 8.5 times higher than gross annual income based on September 2016 data, according to CoreLogic.
However, Demographia’s recent International Housing Affordability Survey, which was released in January, puts Sydney’s house price-to-income ratio as high as 12.2 times.
So what’s causing house prices in Sydney to shoot up to the stratosphere? According to Lawless, it’s investors, many of whom are scrambling to reap capital gains in the Sydney property market.
“It clearly is not about the yield because yields are at record lows in Sydney. Investors are willing to sacrifice the cash flow on their property and are buying to secure future capital gains it would seem,” Lawless told news.com.au. “Other investment classes at the moment really aren’t that appealing. Cash and bonds, even though they are very safe, aren’t offering up much return because interest rates are so low. Housing has provided a very strong return with capital gains in markets like Sydney and Melbourne.”
Investors make up slightly more than half (57%) of all new mortgage demand in New South Wales, according to the latest housing finance date from ABS. This is significantly higher than the long run average, which is slightly above one third.
Across the board, Australian capital city home values climbed 1.4% in February, taking the annual growth rate to 11.7%, the best since the 12 months to June 2010.
Soaring house prices have come at a cost, with household debt soaring to record levels and housing affordability tanking. These issues are fuelling regulator concerns and placing pressure on governments.
NSW Excerpt From The 2017 March Market Report
Property Professionals Anticipate More House Price Growth In NSW This Year
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