The NSW capital has surpassed itself by topping the record-high boom-time results it achieved last year.
“Lower interest rates and a strong local economy have fuelled house price growth, while unit prices also continue to rise despite significant levels of new apartment construction. With buyer and seller confidence high, further increases can be expected,” says Andrew Wilson, chief economist at Domain Group.
“If you’re a first time buyer, you could find your perfect home at a more affordable price by exploring the apartment market for hidden gems.”
This boom is being echoed in the auction market, as clearance rates reached 80% in mid-October 2016. This reflects high levels of buyer activity, although lower supply also plays a role: the number of properties on the block have dropped since 2015.
ABS reports that the percentage of loans approved for residential investors rose by 1.6% in August 2016, and that the majority of these lenders were from NSW, suggesting that investors still look mainly to Sydney for property investment. With the upswing of the apartment market, investors are pouring into NSW to secure good returns.
Experts downplay oversupply concerns
While there have been oversupply concerns, some experts believe investors should not be overly worried.
“There’s a lot of talk about oversupply, but show us where has it fallen,” states Jeff Xu, founder of property development firm Golden Age Group.
“In popular areas like North Sydney … the fundamentals are balanced.”
However, Louis Christopher, founder of SQM Research, has some concerns about the unit market in the CBD and in northwest Sydney, where he foresees a price drop of up to 25%. That said, he thinks fears that Sydney’s growth has moderated may be a bit exaggerated.
“There are many indicators that say the market is accelerating again. The oversupply is not enough to create an almighty crash,” he says.
“The test for inner city apartments would be this year and in 2018, when many apartments have completed and come onto the market. The rise in rental stock could increase vacancy and suppress rents further. The fallout of any oversupply would be felt by investors then.”
Affordability problem persists
Sydney’s strong growth period has benefited property owners who have profited considerably from previously purchased homes. However, those looking to buy into the market continue to face affordability barriers, especially first home buyers.
“Strong migration into NSW and fewer homes available for sale … put pressure on property prices,” explains Angie Zigomanis, residential researcher at BIS Shrapnel.
This was highlighted recently by Federal Treasurer Scott Morrison, who called for state governments to take action on the issue of housing affordability. Part of the problem may be the lack of stock in pockets of the metro, such as in the CBD.
Annual price growth is likely to be in the single-digit realm moving forward, according to Paul Bloxham, chief economist at HSBC. This is evidenced by the increasing number of homes on the market and the tightening of lending guidelines by banks.
Indeed, some regions are already starting to report declines – units in Canterbury Bankstown, the south, west and the Upper North Shore lost value in the three months leading up to September.
Stamp duty is yet another concern for Sydneysiders, with the levy causing many homeowners to avoid moving house. When downsizers stay stagnant, upgraders cannot move forward.
“We’ve got the highest prices ever and the lowest number of properties on the market,” says Robert Simeon, director of Richardson & Wrench Mosman-Neutral Bay. “And the reason for it is government taxes and charges.”
SUBURB TO WATCH
Curl Curl: Beach paradise shines in regional market
While it is known for being one of the best surf spots in the Northern Beaches region, Curl Curl is more than just a prime vacation spot.
With the prices of eastern beachside suburbs rising, demand is shooting up for properties in Curl Curl. The median house price jumped nearly 19% in the past 12 months, with the majority of interested parties being families. According to James Smyth, the real estate agent handling most of Curl Curl’s dwellings, many older properties are being renovated by young families. This is likely attributed to the presence of primary and secondary schools in the area.
Economist Andrew Wilson also notes that Curl Curl recorded the highest level of growth among beachside suburbs in the six months leading up to September 2016.
The suburb can be accessed by bus, ferry and train, and the Sydney CBD is around 30 to 40 minutes’ drive away, depending on the time of day.
