We’ve just released our first Sydney McGrath Report designed to arm owners, buyers, sellers and investors with the crucial statistics and market analysis you need to make informed decisions this Spring. I look at when the Sydney recovery will begin and why. Read on to learn more about where we are now and where we’re headed next.
By John McGrath
Where we are now
Despite the GFC bringing challenging times for all economies and financial markets, Australian residential property has outshined other asset classes. Whilst most markets in the US and Europe have seen price declines of 25%-50%, the Australian market has stood firm with price corrections ranging from 5% to 25% .
In short, we’ve done very well. How come? Here’s a few reasons:
• A strong banking environment left us with far less sub-prime carnage than elsewhere and the banks never stopped lending to qualified buyers during the GFC.
• A low interest rate environment provided us with the tools we needed to reduce pressure on existing borrowers and encourage others, particularly first home buyers and investors, into the residential property market.
• Government incentives were highly successful in attracting first home buyers into the market during the early stages of the GFC. In the past year alone, almost 39,000 First Home Buyer Grants were processed in NSW.
• A housing shortage around the country meant there was a reasonable balance between supply and demand, so as demand reduced it was less noticeable because we were in a period of artificially low supply.
• Low unemployment, coupled with significantly lower interest rates, meant that many people who retained their jobs were actually better off than they were pre-GFC.
Where we’re headed next
One of the most common questions I’m getting today is: “When will the recovery begin?”
The simple truth is that no one can pick the bottom of the market until it’s past. But my gut feeling is that real estate markets in most parts of Australia, certainly Sydney, are past the worst and heading for some blue skies in 2013.
That’s not to say I expect either a straight line growth recovery or an instant uplift in prices. Neither of these outcomes is likely. However, what I’m seeing on the ground, backed up with some key data points, is that we are through the worst and at the beginning of the next growth cycle. We have already seen Sydney median prices grow by just under 2% in the past 12 months.
Here’s a quick snapshot of the key trends we’re seeing today that prove we’re well on the road to recovery in Sydney:
• Lower days on market
• Investors returning
• Multiple bidders at auctions and improving clearance rates
• The return of multiple offers for many private treaty sales
• Affordability has increased, particularly for first home buyers
• Home loan rates now at a 3.25% cash rate is the lowest in three years
• Rents have continued to head higher
So, as we look at these factors and observations, it seems to me that all things considered we will see price growth in Sydney in 2013. Here are my predictions (no point sitting on the fence!).
Sale prices
• Under $750,000 – up 2% to 5%
• $750,000-$1.5m – up 5% to 8%
• Above $1.5m – neutral for the next 3 quarters, then up 10% in FY14 (if the ASX hits 5000, the top end of the property market will see rapid increases earlier than this.)
Rents
• Up 4% to 5%
Next week, I’ll fill you in on more trends, including developers downsizing and producing smaller properties; the ‘greening’ of Sydney real estate and renovation trends. I’ll also tell you about Sydney’s most popular urban villages and a few other fast facts to give you confidence out there in the marketplace this Spring.
You might also like…
John McGrath’s Spring Real Estate Market Review
John McGrath: Property Investment Strategy
Your Family Home as the Cornerstone of Wealth: New Statistics
