The market is softening as a result of investor activity slowdown, but Sydney is too strong to crash
Falling prices continue to define what was only recently the strongest property market in Australia.
Sydney’s dwelling values continued their steady, if slight, drop heading into the March 2017 quarter, solidifying the conclusion of its growth cycle.
“Propertyology believes that Sydney’s economy is too strong for double-digit price declines; however, the end of the growth cycle is well and truly over. The volume of properties now listed for sale in Sydney hasn’t been this high since the onset of the GFC, and auction numbers are consistently inferior to the same time last year,” says Simon Pressley, managing director of Propertyology.
With apartment demand slipping and construction on the rise, oversupply could wind up becoming a big issue in the near future. Certain blue-chip suburbs already have various unit developments in the pipeline, including Botany Bay, Marrickville, Bankstown and Liverpool.
“If we have a look at pretty much every measure, apartment demand is down 22%, housing demand is down about 4%, and rental demand is down about 9%. I think we’ve hit a cap in terms of what people are prepared to pay,” says Nerida Conisbee, chief economist of REA Group.
Economical factors buoy the market
Even with these setbacks, Sydney looks set to power through on the strength of its economy.
“Overall, the NSW property market remains extremely strong. This is primarily due to a low unemployment rate of 4.8%, compared to a national average of 5.5%, along with continued population growth and nationleading infrastructure projects,” explains Rich Harvey, CEO of propertybuyer.
Harvey sees this current downturn as a positive development that has allowed Sydney’s prices to steady.
“While APRA’s 2014 and 2017 lending restrictions pulled back the proportion of investors in the market, the Sydney market is now stabilising and waiting for the catalyst for its next growth phase,” he says.
lending restrictions pulled back the proportion of investors in the market, the Sydney market is now stabilising and waiting for the catalyst for its next growth phase,” he says.
“Overall, it’s a good thing the market is taking a natural ‘breather’ at this stage of the cycle, as it gives a chance for home buyers to trade confidently in a more stabilised market. Strong population growth, jobs and infrastructure will continue to drive the Sydney market forward,” Harvey says.
SUBURB TO WATCH
ADAMSTOWN: Houses shine in Newcastle suburb
Just 6km from the Newcastle CBD, the suburb of Adamstown is looking at fairly strong growth in its housing market.
Adamstown has consistently been on the up since 2013; house values increased by 12% in the year leading up to February 2018 alone. Unit prices also increased, but not by much; apartments are still reasonably priced at under $430,000.
Located along the Newcastle-Gosford section of the Main North rail line, Adamstown is a community-oriented suburb with three schools and several community support organisations. It’s also the northern terminus of the Fernleigh Track bike path and is home to one of the oldest football clubs in Australia, the Adamstown Rosebud Football Club.
Transport: Adamstown is a shop on the Newcastle-Gosford section of the Main North line
Education: Home to three schools - one high school and two primary schools
Can you afford to buy in this suburb? Find out how much you can borrow