It’s been refreshing to see more inventory come onto the market in Sydney’s east, especially as we head into the traditionally slower winter months.
Does this mean a dramatic price correction is on the cards? Or are we just seeing a return to normality?
Sellers: You’re still in the driver’s seat
As we move into the 2017/18 financial year, Sydney’s housing supply is at its highest level for this time of year since 2012. But that doesn’t mean prices in Sydney’s parkside/beachside suburbs are about to crash.
The fact is that property owners in these areas are always going to be on the right side of the buyer/seller divide. Influences like the low construction rate, key infrastructure projects like the South East Light Rail extension, and the near impossibility of finding new land, all contribute to making the eastern suburbs one of Australia’s most exceptional markets, and this won’t change in the foreseeable future.
Buyers: The worst could be over
Talking with buyers recently, I’ve emphasised that the past 18 months was extremely unusual in terms of the low volume of housing stock on offer. In over 25 years working in Sydney’s east, I hadn’t ever seen such a tough market for buyers – one that persisted even during peak selling periods.
Even though there’s now more to choose from, I can’t say it’s suddenly time to snap up a bargain. With property values following a growth rate of approx. 45% over the past four years, buyers are still paying more today than they were 18 months ago.
The good news is that this rate of growth is very difficult to replicate. I’m confident we’re about to see a return to more sustainable, single-digit growth over the coming financial year.
Interest rate rise? Don’t bank on it.
With the cash rate remaining at 1.5% for the 11th consecutive month, we can safely say the RBA’s focus is on managing household debt – now at historic highs – by keeping the cash rate down.
Plenty of people assume interests rates fluctuate in line with property prices, but this isn’t the case. We have to remember that the RBA looks at the market holistically, so real estate is only one of the factors they consider.
Even if we do start to see rate increases from the big four banks, we still have a huge amount of ground to cover before coming close to the 6% rates property buyers were chasing a number of years ago.
What about capital growth?
The 2017-18 federal budget focused heavily on housing affordability, but in terms of the desirable markets in Sydney’s east, I don’t predict a sudden shift in favour of sellers. What we could see, however, is a slower rate of capital growth. Vendors who have been enjoying double-digit growth may need to come to terms with slower, single-digit growth over the coming year.
At the end of the day, Sydney’s real estate market is a moving target, but the eastern suburbs are protected from these fluctuations through sheer desirability. The days of hyperactive growth may be coming to a close, but a return to more predictable prices won’t bring on any sudden change in the east.