The figures don’t look great, but our experts predict that pent up demand will lead to a more significant upward growth shift during 2008.
With growth of just 2.25% for houses during the three months to December 2007, only Perth could save Sydney from being the worst-performing state capital according to Residex data.
The news was even worse for country NSW, with its 0.38% growth the lowest in Australia. 
According to the ANZ Property Outlook for January 2008, price growth remains “patchy with softer conditions on the western fringe while inner and eastern suburbs have moved ahead strongly”.
The recovery has been buoyed by a marked tightening of housing market conditions says the report, with the vacancy rate falling to a 19-year low of 1.4% in September. In addition, the NSW economy has accelerated in 2007 and is now once more growing at a respectable pace.
While 27,000 NSW residents moved interstate in the year to June 2007, international migration was boosted by 55,000, and the demand for housing remains solid, and supply/demand issues look set to continue as a result
“Our projections suggest a critical and rapidly expanding shortage of housing in Sydney will provide significant support to house prices and rents and foreshadow a further deterioration in housing affordability in the medium term,” says the ANZ report.
“Tightened conditions have already seen rent accelerate… with vacancies set to push even further below record low levels in the year ahead, ongoing rapid rental growth appears inevitable.”
Interest rate hikes are likely to affect the Sydney market ahead of all other Australian capital markets, particularly throughout the susceptible mortgage belt zones of the west and southwest where many home buyers paid too much during the property boom four years ago.
Enter the new trend of lenders spiking rates independently of the Reserve Bank and there’s a real combination to keep Sydney’s fringe markets jittery for a while longer, the report adds.