Auction clearance rates in Sydney are at heights not seen for a decade and home buyers are suddenly willing to pay well above reserve prices. So why is Sydney's property market so buoyant?
The economic factors underpinning the market's recent strength have been with us for some time. Interest rates have fallen gradually for nearly two years and reached a 60-year low last month. Borrowing costs are a key factor for the vast majority of property buyers so it is not surprising super-low rates have stirred demand for property.
The performance of the NSW economy has also been supportive. Growth has been steady and the jobs market relatively robust despite a modest rise in unemployment in the past few months.
The global economic backdrop is also much improved as the effects of the global financial crisis and European debt problems finally begin to fade. The unique dynamics of the city's housing market in recent years have also played a role.
House price growth in Sydney has been patchy ever since the great boom, which peaked a decade ago after lifting the median house price by 160 per cent in eight years. Housing construction in Sydney has been relatively subdued ever since, despite steady growth in the population.
The result is tight supply of housing which is reflected in rising rents and low vacancy rates.
Given this blend of very low interest rates, a stable economy and pent up demand, it is no surprise the Sydney property market is showing signs of life. A new factor at play is an upbeat investor mood.
The most recent Westpac-Melbourne Institute consumer sentiment survey told the story. Its sub-index that tracks opinions on ''whether now is good time to buy a dwelling'' jumped 6.5 per cent this month to its highest in four years.
I admire the marketing language of those who try to convince others that rising house prices are somehow a good thing.
I’ve heard a few friends recently talk about ‘climbing on the ladder’ because the longer you stay off it, the longer the ladder gets and the further from the top you are.
Whoever came up with that marketing phrase really was clever.
Another one I hear is ‘rent money is dead money’ and ‘wasting money on rent, better to be paying a mortgage and get something for it’, I love those ones as well, the language implies money paid in interest is benefiting you.
I think we just need more marketing spin on the idea that house prices being affordable without large debts and then price stability would be beneficial for the individual, the term bubble is a good start, we could add ‘pressure cooker’, ‘boiling frogs’, ‘shackles of debt’, ‘a house with a mortgage is like a frown, when the wind changes you are stuck with it’, ‘a family home can only be made with time, flipping houses hurts your family’, ‘every time house prices rise, it hurts your kids’ and so on.
Spring shone on the property market over the weekend, with auction clearance rates up in both Melbourne and Sydney.
Results from Australian Property Monitors (APM) showed Melbourne auction clearance rates at 80.1% (up from 72.6% last week) and for Sydney at 86.3% (up from 79.2% last week).
The results were up dramatically on the same weekend last year, which saw auction clearances at 62.6% for Sydney and 61.2% for Melbourne.
The Real Estate Institute of Victoria (REIV) recorded a clearance rate of 78% across the state, up from 74% last week and 59% compared to the same weekend last year.
Markets were still slower in Brisbane with clearance at 31.3%, down from 43.2% last week. The result for Adelaide was not yet recorded.
APM senior economist Andrew Wilson told SmartCompany this morning that the results for Sydney and Melbourne show the markets are on the rise, particularly Melbourne which he says has “shifted up two gears”.
The first rise was to clearance rates in the 70% range, now it is sitting in the 80% range.
“It is moving into strong territory,” Wilson says. “It shows the enthusiasm in the market, and the impact of the low interest rates.”
Wilson says there were higher property listings in Melbourne, which also demonstrates enthusiasm from sellers and more confidence. However, he says it is still not at the same level as peaks of 2009, 2007 and 2001.
The REIV reported that 837 houses were up for auction across the state on the weekend. Wilson says this is in high contrast to next Saturday, September 28, which will see the property market “pause and reflect” due to the Australian Football League grand final. There will only be around 50 to 60 auctions listed.
For Sydney, Wilson says the weekend results were “almost at record levels”.
“Sydney is on track for its strongest spring ever. It is averaging over the 85% clearance mark.”
Sydney's property boom continues to gather pace with the weekend's 86 per cent auction clearance rate set to make September the strongest month on record.
The average for the first month of spring is now 85.1 per cent, according to the Fairfax-owned Australian Property Monitors, with the market buoyed by low interest rates and rising confidence.
"It's a boom auction market, there's no doubt about that," says APM's senior economist, Dr Andrew Wilson. "The previous strong period was in the autumn of 2002 and that was also our strongest period for prices growth.''
But Dr Wilson still says there is no price boom imminent - rising unemployment, low wages growth and low profit growth will keep a lid on prices, he believes, though he expects 10 per cent median price growth for Sydney over 2013.
He says there are now some encouraging signs at the top end of the market. "And that's all about confidence," he said.
Cooley Auctions principal Damien Cooley reports an 82 per cent clearance rate from his firm's 71 auctions. "It was a particularly strong day," he said. Among the highlights was a two-bedroom ground floor flat in Double Bay, for which five bidders took the price to $1,034,000. "The written reserve was $980,000 … the person who bought it hadn't even seen it."
The head of SQM Research, Louis Christopher, is predicting price growth of between 15 and 20 per cent for Sydney next year. "Sydney … is turning into a beast unto itself," he said.
"Such a rise will create a large dilemma for the RBA, especially if the national economy is still running below average growth."
AMP chief economist Shane Oliver agrees the booming auction market - particularly with the rising dollar - does leave the RBA "between a rock and a hard place" due to weakness in other parts of the economy. "Eighty per cent-plus clearance rates are not necessarily signs of a bubble in Sydney, but the risks are certainly pointing in that direction and the RBA will be wary of throwing further fuel on the fire at this stage." He expects the Reserve Bank to leave rates on hold when it meets next week.
So we’re going with lowering interest rates to zero. A further inflation of the housing bubble is the policy of the RBA. Despite a decline in overall CAPEX which may affect export based states such as Qld and WA most of the Govt infrastructure spending will be earmarked for Sydney and Melbourne. So while overall spend drops spending in Sydney and Melbourne rises. Our immigration policy is to bring 200 to 300K of migrants here each year who get parked on the edges of Sydney and Melbourne and get paid enough by the government to live there so that they are not forced out into the ‘cruel’ less habitable parts of Aus where there are so few ‘amenities’ and where a lot of Australians actually live. Lastly and not least importantly, to support all this, we are going to let ‘foreign investment’ and speculative money flow run wild in order to stave off the crunch in the external account. Essentially Bernanke recently underwrote our external account.
So given all this just what is going to stop the Sydney housing market? Further with Ben underwriting the speculative money flows how do we get our dollar to 60 US cents? Then, even if we could get the dollar to 60 cents who would invest in a system that is totally unproductive and anti-business with no guarantee the A$ won’t be let to rapidly rise back to $1.10 or $1.20 over the following year or two?
Sydney’s housing market is poised for a recovery that will continue well into 2014, real estate mogul John McGrath says.
“There is no bubble. Sydney properties are not overvalued. They are at fair market value and heading up,” Mr McGrath wrote in his annual report released on Monday.
“The simple fact is that the weight of demand from many of the influential wealthy buyers seeking to secure a part of Sydney is in certain pockets,” he said.
“It’s fair to say that it will get harder for Sydneysiders, young first-home buyers, couples, to own their dream property in their dream suburb, but certainly not impossible.”
While a gradual lifting of interest rates expected to occur from the second half of 2014 will bring housing market activity closer to long-term averages, John McGrath expects this upward trend in housing market activity will continue largely uninterrupted.
“Investors are back in force looking [for] secure bricks and mortar assets ahead of the next growth phase, both personally and through their self-managed superannuation funds,” he said.
Sydney is poised for a recovery hey? How many times have we heard that crap over the past decade. If 15 years ago they had said sydney was poised to turn into an ethnic madhouse they would have been right by now. Sydney aint New York, it is all just suburbs and in that respect is more like Detroit.
I'm seeing more and more women with head scarves around my way.
Not that I really care. It used to be very white once and most of them were pretentious self entitled bogan shit.
Then I see these fat anal accountant fucks in their 4WDs with scared, angry looks in their eyes hoping their 4WD will save them and they're just going to continue being on top.
Sorry pal, the biggest amount of 457s were docs and nurses last year, no one is safe!
You're all fucked! If it isn't you, it will be your kids!
Better start learning how to use chop sticks, and learning how to play mah jong!
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
there's a chronic shortage of medical professionals, thats why you fuckwit.
the whole point of 457 is to fill those gaps. or maybe next time you are sick you'd like to queue up and wait a few days ?
No shit. Only because of mass immigration you low life c u. n t.
Maybe next time you feel sick you might want to take nebutol.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
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