PROPERTY

Sydney: Housing Price cools off  What you need to know

Bishwas Bhattarai, Senior Lending Manager
M. Comm. (Banking & Finance) UNSW, Dip. Fin. Plan.

07 November 2017

For those who has been longer it is not uncommon for property market to do downwards it has been evident during 2007/08, again 2009/10 and current cycle is showing some similar signs of market correction.

Most of the prominent areas for house and land packages suburbs in Sydney like Schofields, Kellyville, Jordan Springs and lots other are showing currently oversupplied with more stocks on the market than demand

 

There is no illusion that Sydney house prices are really softening. During the month of November despite having record number of auctions staged most of the capital cities are showing the signs of fatigues. Especially, Sydney as per Core logic this week feel by -0.1% with monthly total to 0.5% on median price. Sydney still has Auction clearance rate of over 60% throughout the month of October and is resilient, but open houses are evident that buyer’s sentiment is very low. Melbourne is still leading the market with modest growth fuelled by boom of net population growth. However, most of the capital cities are showing downward pressure.

 

Realestate.com.au states the total number of properties on offer in Sydney currently is 26,459 which is up by almost 19.9% as compared to same time last year, however buyer and market sentiment has been lower. This is partly too blamed for the prudential measure with new lending restriction being imposed, and tougher measures for foreign buyers to enter into property cycle. Compared to Melbourne where the property has increased only by almost 1% compared to same time last year however demand has soared. Hobart is improving after the disastrous drop of 32% over last year.

Sydney still is resilient and showing the Auction clearance rate of over 60% throughout month of October and early November. There is a parity between the Vendors expectation and buyers offer at the moment and simply property are not been exchanged as quickly as it used you. However, clearance rate in Southwest and Inner west are much lower showing the signs of market cooling down. Like any assets class property market also performs on cycle long term trends are robust but short terms is not pointing to healthy market. For those who has been longer it is not uncommon for property market to do downwards it has been evident during 2007/08, again 2009/10 and current cycle is showing some similar signs of market correction. For buyers extreme caution and research needs to be done prior to entering property market.

 

There is no denying plenty of bargains within Sydney market. It is predominantly buyers’ market lots of negotiation can be done on table like vendors discounting, settlement terms likewise. Buyers are urged not to overcommit with their borrowing capacity, and be aware for the purchase “off the plan” (OTP) with proposed settlement in short term. Most of the prominent areas for house and land packages suburbs in Sydney like Schofields, Kellyville, Jordan Springs and lots other are showing currently oversupplied with more stocks on the market than demand. The weakest area in Sydney reported are Hornsby, Blacktown, Southwest and auction clearance rate on those areas are also very poor. Suburbs, with good school amenities and infrastructures are more resilient. Currently, Sydney is also suffering from compressed lower rental yield and with record high numbers of housing, plus apartment approvals this is likely to add more fuel. Market correction could hit somewhere about 10% within next year Sydney market alone.

 

And it not all grimmer, Sydney has good month in respect to job growth last month, followed by Western Australia. According to seek during the month of September over 12.1% job growth was created same time last year. This is a very good indicator which shows the market is resilient and people will have income to cope through the tough times. This also provides the buyers confidence to make purchase.

 

However, Sydney has almost certainly reached the peak of the boom times if not very close to it. When investing it is crucial to understand fundamentals, risk and appetite prior to investing in that particular asset have long term strategy. Especially, OTP purchases needs to have the short term strategy as well.

 

Photo Source : Core Logic.