With investor demand falling, Sydney may experience flat – or even declining – price growth in the near future
Bank restrictions are weighing on investors, and the resultant decline in demand is influencing predictions regarding the Sydney house market. The Residential Property Prospects 2017 to 2020 report published by BIS Oxford Economics indicates that the median house price in Sydney is forecast to be lower in 2020.
Investors have been the primary driver of the state property market since 2013, accounting for over 50% of residential loans. They have placed significant upward pressure on values as the loosening of lending restrictions saw price growth resurge in the period 2016/17, making affordability a major issue for Sydneysiders.
“As investor expectations of capital gains are reduced, investor demand is expected to weaken further, creating additional downward pressure on prices,” says Angie Zigomanis, senior manager at BIS Oxford Economics.
This slowdown may have the effect of tempering Sydney’s house values. And new stock entering the market is another factor contributing to this – apartment projects have been steadily reaching completion, easing undersupply. As a result, values look like they will plateau as the market adjusts to this shift.
Nonetheless, the blow to the market is not anticipated to be particularly strong, with median house prices expected to fall by a maximum of 5% in the next couple of years. Interest rates remain low, so even if rental rates go down, investors should still be able to make mortgage repayments without being forced to sell their properties below value.
Sydney buoyed by strong economy
For Michael Yardney, CEO of Metropole Property Strategists, the decline represents how “Sydney’s property market is taking a welldeserved breather”.
“The underlying fundamentals are still strong – last year, Sydney created almost a third of all the new jobs around the country,” Yardney explains.
“Sydney’s housing market is likely to still outperform the other property markets other than Melbourne in 2017, underpinned by major infrastructure spending, strong economic growth and employment growth leading to population growth.”
Yardney anticipates that the reimplementation of the First Home Owner Grant will help boost the percentage of owneroccupiers looking at established units. With rich buyers looking at properties near their workplaces in the city, he expects inner- and middle-ring suburbs to be the top performers.
“In Sydney, there’s still heavy demand for apartments,” says Philippe Brach, CEO of Multifocus Properties & Finance.
“Although it’s going to slow down in terms of growth, because the demand is way outstripping the supply, property prices are going to carry on increasing.”
SUBURB TO WATCH
BLACKBUTT: Forest reserve flourishes in great location
The home of the Blackbutt Forest Reserve, which covers the eastern half of the suburb, Blackbutt is just 3km from the Shellharbour city centre, giving residents the best of both beautiful, open parklands and urban living.
The shore is only a few minutes’ drive away, and properties here provide gorgeous views of Port Kembla Beach. Shellharbour’s shopping centre is nearby as well.
With the appeal of this suburb, property prices have been soaring: both houses and units recorded 13% growth over the 12 months to July 2017. This trend shows no signs of faltering, since investor returns are coming in reasonably strong at 4.3%.