Negative affordability talk and tighter lending regulations mean investors are staying away, even as supply increases
Sydney is typically one of Australia’s best markets, but findings from the May 2017 quarter suggest that this capital is currently in for a bumpy ride. Property prices slipped by 1.3% in the past month, according to CoreLogic, suggesting that lending restrictions may finally be taking a toll.
“Regulatory bodies are placing a continued focus on investment loans, and we have seen banks independently increasing rates. As a result, we are seeing declining demand from investors in some parts,” says Charles Tarbey, chairman and owner of Century 21 Australasia.
“We are starting to see supply lines slowly increasing, which may lend itself to softer market conditions over the next quarter. More stock and fewer buyers may lead to less bullish growth than we have previously seen.” Tarbey pinpoints the outer ring as an area where stock on the market is rising. Nonetheless, he does not believe that the market has peaked just yet. REA Group’s chief economist, Nerida Conisbee, agrees that “it’s too early to call the peak”.
Demand was at its highest in March, but people are more cautious now about Sydney as they are priced out of the market for both houses and units. In addition to tightened lending criteria, Conisbee points to the negative media regarding affordability as a reason for the drop in interest.
Possibly as a response to high prices in the metro, regional areas are getting a boost.
“There will be sustained capital growth and opportunity for investors in the major regions that are commutable to Sydney, ie Newcastle, Central Coast, Wollongong and the Blue Mountains,” comments Jane Slack-Smith, director of Investors Choice Mortgages.
“Major regional centres built on multi-industries, like Dubbo, Bathurst, Tamworth, will continue to have good property demand. This is primarily due to affordability in Sydney’s feeder cities, and good rental returns that will attract investors.”
Moreover, although added supply could at first derail the market in Sydney, it also has the potential long-term benefit of solving the price problem.
“It balances supply and demand initiatives,” says Cheryl Thomas, deputy executive director of Property Council NSW.
“More housing supply must not be restricted by misleading preconceptions of what increased density is – solutions can be found that provide great liveability options for the community that include services, green space and transport.”
Thomas also warns against tightening the restrictions on foreign investments too much, as these investments drive growth in the market and in the economy through job creation.
SUBURB TO WATCH
BANGOR: Unit yields considerable in southern Sydney suburb
Over the past decade, the suburb of Bangor has been recording strong, steady increases in property values.
In the past year alone, both houses and units recorded over 10% growth. However, despite the median price exceeding $850,000, the average rental yield of apartments was reasonably high at 4%.
Bangor’s appeal may lie in its small-town feel. The suburb is primarily residential, and the heart of the commercial scene is the local shopping centre, which houses a supermarket, dining establishments and pharmacy, among other amenities. There are several primary and secondary schools here, such as Bangor Public School and Inaburra School.
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