State of the Sydney Property Market – May 2018
After a boom of over 5 years during which time many house and unit prices have doubled, Sydney has finally moved to a more equal market, which is providing buyers with more opportunities to a negotiate at a discounted price.
Auction clearance rates are now down to the 55-60% range, however some areas and price levels are performing better than others.
Sydney’s premium and inner city suburbs have performed the strongest although we are commonly seeing reduced competition for each property. This is in contrast to the outer suburbs of Sydney, which have the lowest clearance rates and softest prices.
Brand new developments in Sydney are seeing lower demand from overseas buyers. This is particularly evident with buyers from the Chinese mainland, who have been discouraged by recent NSW Goverment taxes, together with increased charges from the FIRB (Foreign Investment Review Board).
We are also starting to see some good buying opportunities for those looking to purchase now, with less competition. That said buyers need to be more savvy about the type of property they are purchasing, and to do their research and due diligence properly.
Many of our clients are asking us whether to buy now or wait. Our advice is that quality property is always in short supply, and that we are not expecting the Sydney market to fall as the fundamentals are still there to sustain further growth, although at more modest levels.
Investors should 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 in likely to be low over the winter months of 2018. 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 into the foreseeable future. This is despite banks making their own interest rate decisions.
- 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, 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 and improving. Economic growth is forecast to be over 3% for 2018 by the RBA. Domestic spending has been a key contributor to growth.
- The national unemployment rate is steady at around 5.6% (April 18) with NSW at 4.9%.
- 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.
- Stamp duty concessions for first home buyers.
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.
- Potential over supply of new unit develoments in some areas of Sydney.
- Tightening of investor loans by some banks
- International political and economic uncertainty.