Sydney Property Showing It Has Space To Launch
Within the solar system of Sydney property, the planets are seemingly aligning.
While not meteoric, Sydney’s housing market continues to launch a comeback, with values trending upwards once again during the month of September.
It now appears poised to correct the falls seen since property prices were eclipsed after reaching peak orbit in 2017.
CEO of Your Empire, Chris Gray, said the price rises were not astronomical but were a clear indication that the market was back on track to recover lost ground.
“Prices are now up 3.5 per cent for the quarter and at this rate we will regain the previous 2017 highs within the next 12 months,” Mr. Gray said.
“Since its peak, Sydney property prices are now only down by less than 12 per cent and it looks like the bottom is in, with the strong auction clearance results that have been around 80 per cent suggesting buyers are keen to get back into the market for fear of missing out.”
Lower interest rates, higher auction clearance rates, a tighter rental market and APRA’s recent lowering of very high serviceability rates all point to a sustained recovery. The affordability – or serviceability – calculation is a test designed to see if people could afford to pay off their home loan if there was an interest rate hike.
Buyer sentiment, or the fear of missing out alluded to by Mr. Gray, is also a driving factor.
The latest Australian Bureau of Statistics figures showed both investor and first-home buyers surged back into the mortgage market, pushing new lending, including refinancing, up 4.5 per cent in August.
New stock listings also remain scarce, with fresh listings down 13 per cent on a year earlier and 15 per cent below CoreLogic's 13-year average for this time of year.
Vacancies: now firing
The September REINSW Residential Vacancy Rate Report reveals rental vacancies in Sydney dropped to their lowest rate this year, down 0.7% on August.
Total vacancies across Sydney now sit at just 2.9%, having hovered above 3% since November 2018.
Since August, vacancies in outer Sydney have dropped from 3.5% down to 2.7%, middle Sydney is down to 3% from 3.9%, while vacancies in inner Sydney are down from 3.4% to 3.1%.
Business Development Manager at Belle Property Dee Why, Finn Simpson said a return to a healthier Sydney rental market could result in rent increases being justified in the next six to nine months.
“October and November are traditionally the best months of the year to find tenants, so I will be encouraging my landlords to sign 12 months leases at this time so any potential vacancies fall within the best cycle,” Mr. Simpson said.
Portfolio Manager at aussieproperty.com, David McElwain, said the low interest rate environment would likely buoy consumer sentiment and get the rental market firing.
“There are ongoing warnings from economists that this boom and price increase period may not last but current indications are that interest rates will not rise again for a considerable period of time so it is a good time to get into the market,” Mr. McElwain said.
“Rental returns are still not great and landlords will still occasionally have to reduce rent for new lettings but again this is a supply and demand situation that will stabilise over time.
“Well located property that ticks all the boxes is still in very short supply and even though spring brings more listings to the market, it is likely to be an issue moving forward.
“Buyers need to have all their ducks in a row and be ready to make a quick decision if they are to be successful in bidding on a property,” he said.
Elsewhere in New South Wales, the tightening rental market was also a trend.
Vacancies in the Hunter Valley are down to just 1%, while in Newcastle rates are down to 1.2% from 1.5%.
Total vacancies in the Illawarra decreased to 2.2%, down from 2.3%, although there was a climb in Wollongong for a second consecutive month.
More than half of the other regions also experienced a decrease in vacancies. The South Eastern region experienced the most dramatic drop, down from 4.1% to 1.2%. The Northern Rivers also saw a large fall from 2.1% to 1.6%.
September 2018 sales prices vs. September 2019
While Sydney values are making up lost ground, as of September 2019 they are still well below the levels of the previous Septemeber.
In the table below, Ripehouse Advisory Analysist Will Farrell shows the shift in capital city market values, comparing the first, median and third quartile sales prices for September 2018 with September 2019.
The graph below shows the retraction of Sydney values from Septemeber 2018 to September 2019, depicting this movement in comparison with other capital city markets.