State of the Sydney Property Market – October 2017
The Sydney property market is still performing reasonably well overall with recent Spring auction clearance rates of 65-70%, however it is definitely not as heated as earlier in the year when the clearance rates were mostly in the 75-80% range.
Many houses and units are still selling well, particularly for quality places in the premium and inner city suburbs, although there we are often seeing less competition for each property than previously. This is in contrast to the outer suburbs of Sydney, which have the lowest clearance rates and softest prices.
Overall the Sydney market appears to have moved more into a plateau or modest growth phase, following over 5 years of continuous and strong price growth.
We are also starting to see some good buying opportunities for those looking to purchase now, with less competition.
Is this a temporary “breather” or is the strong price boom over and a new cycle upon us ? Time will tell and movement further into the selling season will give us a clearer picture.
What are the factors that will continue to drive demand ?
- Lack of housing stock. Available listings are way down on previous years, with no signs of this changing into next year. Home owners are choosing largely to renovate their current homes rather than to move or upgrade.
- Record low interest rates. The official RBA rate of 1.5% is well below GFC levels of 3%, and is keeping borrowing costs low for both home buyers and investors. Most economists are expecting these rates to stay low well (or even be further cut) into the foreseeable future. This is despite banks making their own interest rate decisions.
- Increased immigration into Sydney, which combined with a lag in development is continuing to put pressure on new housing supply. There are still a large amount of buyers ready to purchase homes
- Demand for property from investors will continue, particularly family superannuation funds purchasing property. Returns are relatively modest (3-4%) however they are higher than bank deposit rates and many share market returns
- The Australian economy is still relatively strong. Economic growth currently sits at 1.8% for the year to June 17. The economy grew 0.8% in the three months to June 17, an improvement from the 0.3% growth recorded in the first quarter. Domestic spending was a key contributor to growth.
- The national unemployment rate is at 5.6% (July 17) with NSW at 5%.
- An active NSW State Government, which has major infrastructure projects currently under construction and also planned. NSW continues to the be the strongest performing economy in Australia. Most other states in Australia do not currently have pro-active infrastructure building Governments.
Some potential risk factors ?
The last NSW State Government budget introduced higher duties and land taxes for foreign buyers and owners of property. This appears to be having an impact on certain types of properties and suburbs within Sydney. The revenue raised from these duties and taxes is planned to fund the new stamp duty concessions for first home buyers.
- International political and economic uncertainty.