Sydney Property Market Outlook July 2016

Sydney property over the first half of 2016 has performed strongly abate at a slower growth rate than in 2015. As we called it previously, the market frenzy peaked in the September quarter of 2015. Currently, year on year growth is at about 11% according to Core Logic, clearance rates are in the low 70’s indicating about the same growth according to the Newell Property Indicator.
This is our sixth half yearly call on the Sydney Property Market and if you have been following, you will know our track record to date has been excellent. We are sticking to our consolidation stage in the market. No collapse has occurred to date as many have been scare mongering. You are going to see pockets of strength and weakness within Sydney. It will be as the stock market calls it “a stock pickers market”. You may see some volatility where some people have to sell and want their money and if you are in the right place at the right time and no one is watching, properties may go cheap. Remember…..forcing a sale is when you usually lose money.
Going forward, the weakest market will be the new apartment market, in particular one and two bedders. Oversupply and restrictions on borrowings will hamper prices moving forward. Even older units are coming under pressure from heavy special levies that are needed to maintain the buildings for the future. If the Melbourne unit market is anything to go by, with currently almost 20% of all units sold this year at a loss, Sydney may have some hard yards to come.
Interest rates have been and are still accommodative. We had our rate reduction this year which helped bolster the quarter with a 6.7% gain in growth according to Core Logic. Low unemployment is also playing its part protecting the down side. Until one of these factors change, don’t expect any significant downside in the Sydney Property Market.
The stock market at the present is trying to justify its gains by saying interest rates are lower for longer, meaning yielding stocks look cheap to the bond yield. So if this holds up, then the property market may also be re-rated. Considering all factors, further gains in this cycle should be short lived.
Headwinds have increased with lower LVRs from the banks and limited developer funding. Restrictions and crackdown on foreign ownership and reporting procedures when selling a property are all putting a drag on real-estate prices. When you look overseas where this has been implemented, it works eventually, just ask Singapore.
The most notable factor in the property market has been the lack of stock. Some markets are reporting 40% lower stock levels than normal. This is not just the Sydney market but a global phenomenon which makes me think it is one of the side effects of the massive liquidity the central banks are pumping into the system. It is an unknown, that is, the effect on assets and property with the unprecedented action by global central banks and their historic low interest rates.
Clients are becoming frustrated with the lack of stock. Being patient will become a very powerful virtue.
Remember if you are buying, selling or have no idea what to do with your property, contact housePro and I will provide options and an understanding of current property conditions. You will have a far greater chance of getting the best outcome for your property interests with housePro on your side.

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