Middle East war, rising petrol prices and interest rates: what it means for Sydney property
Global conflict is adding uncertainty to inflation and interest rate expectations, but Sydney’s housing shortage may continue to keep property prices relatively stable.
The war in the Middle East is hugely concerning on a humanitarian level. From an economic perspective, particularly as it pertains to property, it introduces an elevated level of uncertainty.
Right now, we have cause to be concerned about the already-high cost of living. Petrol prices have risen considerably since the war commenced and more short-term pain at the bowser is anticipated.
Longer-term, things are less clear. Some flow-on supply chain impacts from the Iran War will be unavoidable and we are already being cautioned to expect the price of everyday items, including groceries, to go up.
It is a dynamic environment in which the Reserve Bank has met and again raised interest rates as it assessed many inflationary pressures and the ramifications for the cash rate.
Clearance rates have been on the collective radar of late. The February average in Sydney was in the 60s, according to Domain, which some have pointed to as evidence of a softening price growth trend.
What recent auction market activity is more likely telling us is that prices are generally stable.
The housing undersupply will continue to be the major influence on prices for the foreseeable future and while interest rate rises will always have an impact, vendors who adopt reasonable price expectations can still be very confident when taking their property to market.
REINSW member auctioneers report plenty of properties selling prior to auction, impacting clearance rates but not necessarily leaving vendors dissatisfied.
Rate rises to cool Sydney market
Should interest rates rise again in May, which is a possibility, we can expect the cooling in price growth to continue. A price correction, though, is unlikely to be on the cards. Only a major influx of new supply will move the needle on affordability.
In Sydney, the NSW Government’s latest supply announcement is a plan to deliver up to 8,500 homes in Glebe, on existing port land directly above the new Bays West Metro Station, which is currently under construction.
The REINSW welcomes commitments to new housing supply in well-located areas serviced by public transport and near employment centres.
However, as we’re seeing now, merely announcing plans for new homes and implementing zoning changes is not having the necessary effect of driving urgent housing delivery.
Developer feasibility is constrained, costs are volatile and current property tax settings are prohibitive. The National Housing Accord targets are moving further out of reach.
There are plenty of owner-occupiers and investors who would ideally like to make a purchase but until there are more supply options, across a choice of price points, the status quo is what we can expect.
