Rising economy props up Sydney property market

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Demand for homes continues to remain strong in Sydney, as the city posted an auction clearance rate of 84.3% last Saturday – its highest in 14 months.

According to veteran economist Saul Eslake, this strong result is all thanks to New South Wales’ rising economy.

“New South Wales, along with Victoria, is the prime beneficiary of the rotation in growth that's going on, driven by the fall in exchange rate and the decline in interest rates,” said Eslake.

New South Wales’ economy expanded at an average of 1.8% between 2001 and 2010. Its population also grew from 1.5 million to 7.6 million people in the last 20 years.

But despite the economic boom, some analysts perceive some issues in the state’s housing market, especially in terms of rising house prices.

LJ Hooker’s Peter Tannous told the Australian Financial Review that he perceives Sydney’s house prices to be “too high” as they are pricing a large number of buyers out of the market. Home values have risen by 61% since 2012.

According to CoreLogic, the median house price now sits close to $800,000 – double than the median price 10 years ago. This makes Sydney the world’s second least affordable place to buy a home.

Some experts also believe that the mix of housing is wrong, with too many apartments being built instead of houses. 

“Ideally, the city needs to see more affordable detached housing options which means improving the transport infrastructure connecting the outer fringe areas and introducing more amenity to these areas,” said CoreLogic head of research, Tim Lawless.

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