State of the Sydney Property Market – May 2019
Despite a barrage of negative media, the first few months of the Sydney property market have been stronger than many property commentators expected.
Auction clearance rates have been largely in the 55-65% range for January to May 2019, which is higher than the last few months of 2018 when it was between 40-50%.
Sydney’s premium and inner city suburbs have performed the strongest, and although inspection numbers are usually quite high we are commonly seeing limited competition for each property when it comes to decision day. This is in contrast to the outer suburbs of Sydney, which generally have the lowest clearance rates and softest prices.
Brand new developments in Sydney are often 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).
We have been seeing some good buying opportunities for those looking to purchase now, with less competition, and have been able to recently negotiate some very discounted prices for our clients. 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 further 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 is likely to continue to be relatively low over coming months. Home owners are often choosing to renovate their current homes rather than to move or upgrade, and also a degree of “wait and see” on the market.
- 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 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. Economic growth is currently at 2.5% with positive forecasts by the RBA and the OECD. Domestic spending has been a key contributor to growth.
- The national unemployment rate has dropped to around 4.9% (February 2019) with NSW at a very low 3.9% (January 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 ?
- Continued tightening of housing and investment loans by banks following the Royal Commission.
- Potential over supply of new unit develoments in some areas of Sydney where amenities have not been planned properly.
- The coming Federal election creating uncertainty, particularly with the Labor Party proposing a radical change to negative gearing and capital gains tax laws.
- 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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