Market Update

2009 Summary

The start of 2009 was characterised by buyer reluctance and extreme caution in the midst of the global financial recession.

However from around February the lower end of the market ($400,000 to $700,000) was kicked along by the Government’s increased first home owner’s grant and record low interest rates.

Around May/June confidence reappeared in the mid market ($700,000 to $1.5M) and a couple of months after that, the higher end of the market started to show some signs of improvement.  As economic conditions in Australia improved and confidence strengthened in financial markets, gains were made across all areas of the market.

Price growth across Sydney was recorded at over 10% across the board in 2009, with higher rises at the lower end of the market and more modest gains in the premium market.

2010 – What’s in store?

The 2010 real estate year has started strongly, with auction clearance rates across Sydney high - between 70 and 83 %.

As buyer’s agents, we are seeing large numbers of people attending open for inspections for both houses and units.  Often there are lengthy queues at the front doors on Saturdays. The number of registered bidders at auctions is also very high, and the bidding is generally very competitive.

The market appears to us to be as strong as the boom of 2002/2003 when price rises were 29% and 15% respectively. Whether the overall gains for 2010 will be at these levels remains to be seen.

Some of the main reasons we are seeing the current boom and increased prices are :

1. Official interest rates are still at very low levels historically with the official reserve bank cash rate at 4% - still 3.25% less than rates were 2 years ago. Although the trend appears to be for higher rates in the future, most buyers have factored this in, and few economists are predicting rates to return to those higher levels in the medium term.
2. The Australian economy is performing very well compared to other OECD economies with economic growth at 2.7% for the past 12 months, and solid growth forecast for the remainder of 2010
3. Relatively low unemployment at 5.3% (compared to nearly 10% in the USA),  is increasing buyer confidence to purchase property and borrow money
4. Return of the property investor to the market
5. Relaxed Foreign Investment Review Board (FIRB) regulations which now make it easier to foreigners to purchase residential property in Australia
6. Low supply of stock. This is a continual problem particularly in the sought after areas of the Eastern Suburbs, North Shore, Northern Beaches and Inner West. Our discussions with selling agents indicated that there is unlikely to be any increase in the supply of listings in the short to medium term
7. Increased immigration to Sydney
8. Lag in new developments around Sydney
9. Sydney appears to be into a positive new property cycle
10. The media is very positive about the Sydney residential market, and this in itself usually plays a very important part in determining confidence of buyers

Therefore in our opinion, provided the international economy continues to stabilise, the Sydney residential property market is set for continued strong growth throughout 2010 in all sectors.