Residential vacancy rates are evening out in NSW as the market goes through a correction period
Sydney's housing market may have hit its ceiling, and things are slowing down in the capital.
“The housing market, from a number of key indicator perspectives, has peaked,” says Leanne Pilkington, president of the Real Estate Institute of NSW (REINSW).
“Prices are easing, clearance rates have dropped, and residential building approvals for April 2018 showed a 5% decline, which is more pronounced than most expected. We’re seeing the market correct at the moment, but in a sustainable, soft-landing way.”
For this reason, Pilkington does not expect to see any changes in interest rates until 2019.
The rental market is also stabilising, as vacancy rates in Sydney are settling. According to the REINSW Vacancy Rate Survey conducted in May 2018, the average rate in the Sydney metro came in at 2.4%.
“We have seen a level of consistency for renters as we move into the cooler months,” says Peter Matthews, deputy president of REINSW.
Availability increased in the inner city but fell in the middle- and outer-ring suburbs. This suggests that people are moving out to where properties are more affordable. Regional areas are maintaining tenant demand, as vacancies also tightened in the Hunter region, Newcastle and Wollongong. On the other hand, occupancies fell in Illawarra, Albury and the South Coast.
Local buyers active
With demand from overseas investors decreasing, vendors are turning their attention to owner-occupiers and interstate investors.
“With changes to foreign investor banking regulations, developers are starting to move away from investor stock and are tapping into the local market,” says Clinton Oswald, national director of Property Economics and Research at Urbis.
“As projects move to completion, we will be keeping a close eye on settlement rates, given the reduced level of funding being offered by the banks to investors.”
The focus on the new market may be giving unit stock a boost. More than 24,000 apartments are under construction as part of 123 housing projects that are currently on sale. Thirty-two developments were completed over the March 2018 quarter, and 29 developments began construction.
With buildin g approvals slowing down, Sydney’s construction is in the delivery phase; the city could therefore see a significant uptick in properties on the market.
SUBURB TO WATCH
LAVINGTON: High returns for low prices
One of the major centres of the City of Albury, the suburb of Lavington enjoys consistent growth while offering properties at low prices.
Although situated in NSW, Lavington is considerably closer to Canberra than to Sydney. Houses have a median value of $279,412, while the median unit price is under $180,000; this follows a 2.4% increase in house prices and 3.1% growth in unit values. Investors can reap very high yields of 5.8% for both types of properties.
As a commercial centre with its own CBD, Lavington is rich in amenities, including Lavington Shopping Centre and, for recreation, the Lavington Swim Centre and Jelbart Park. Many schools are also located in the suburb.
Affordability: Median house and unit prices are both below the $300,000 mark
Education: Local schools include Lavington and Hume Public Schools and Murray High School