State of the Sydney Property Market – September 2019
There has been a definite change in sentiment in the Sydney property market since the Federal election.
The threat of changes to negative gearing and capital gains taxes has been removed, and clearing the air.
Secondly APRA has removed the regulation where banks were required to base a home loan borrower’s capacity for repayment on a 7% interest rate, and banks instead would set their own minimum interest rate floor.
Thirdly at the June & July meetings, the RBA reduced interest rates by 25 basis points, the first change in around 3 years. The cash rate stands at 1.0% and mortgage rates are now at record lows.
Buyer numbers have increased substantially at open inspections, bidding registrations have increased at auctions, and auction clearance rates have improved significantly.
Sydney’s premium and inner city suburbs have performed stronger than the outer suburbs, and auction clearance rates have been highest in the Eastern suburbs, North Shore, Inner West & Northern Beaches.
However some brand new developments in Sydney are still seeing lower demand from overseas buyers. This is particularly evident with buyers from the Chinese mainland, who have been discouraged by the NSW Goverment taxes, together with increased charges from the FIRB (Foreign Investment Review Board).
Investors should continue to be focused on areas that have new transport and amenity infrastructure planned, including suburbs along the Sydney Metro and also the planned Northern Beaches tunnel link.
What are the factors that will continue to drive demand ?
- Lack of housing stock. Our discussions with sales agents indicate that the supply of new listings is likely to continue to be relatively low over the winter months. Many home owners are often choosing to renovate their current homes rather than to move or upgrade.
- Record low interest rates. The official RBA rate of 1.00% is well below GFC levels of 3%, and is keeping borrowing costs low for both home buyers and investors. Some economists are expecting that rates could be further reduced over coming months by the RBA.
- Increased immigration into Sydney, which exceeds the rate of new development and will continue 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 although at more modest levels. Gross rental returns are currently averaging between 3-4%, which although reduced, are higher than bank deposit rates and many share market returns.
- The Australian economy is still relatively strong, despite a recent reduction in GDP growth rates. National economic growth was 1.8% to March 2019.
- The national unemployment rate is still relatively low at 5.2% (June 2019) with NSW at a low 4.6% (June 2019).
- A re-elected NSW State Government, which has major infrastructure projects currently under construction and also further projects planned. NSW continues to the be the strongest performing economy in Australia. Many other states in Australia do not currently have pro-active infrastructure building Governments.
- Stamp duty concessions for first home buyers.
- The allure of Sydney as an attractive and vibrant international city, with it’s harbour, beaches, climate and outdoors lifestyle
Some potential risk factors ?
- Potential over supply of new unit developments in some areas of Sydney where amenities have not been planned properly.
- The NSW State Government’s 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 was planned to fund the new stamp duty concessions for first home buyers, however the NSW Govt has revised revenues from these taxes downwards.
- International political and economic uncertainty (Brexit, US/China trade agreement etc).
If you have any queries on specific areas of the Sydney property market, then please do not hesitate to contact us on (61 2) 9958 4815 or by
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