According to CoreLogic residential property accounts for more than half of all household wealth – not surprising when you consider Sydney alone has had 16.2 year on year growth in values with a median dwelling price now over $770,000 – this includes units.
Low interest rates account for most of the stimulus while investors for the first time on record now surpass home buyers. There is some concern that Chinese investors looking for alternatives to their local share market may flood the Australian property market.
National figures show that detached housing are clearly outperforming apartments over the financial year. Over the financial year, house values were 10.4 per cent higher across the combined capitals index while unit values increased by a much lower 5.6 per cent.
The outlook is for continued growth in the Sydney market.
In the current Sydney market with houses averaging only 29 days on the market it may be time to re-assess your decision to sell before you buy. Of course that is not say that you rush out and sell your home – you need to ensure that you are going to have the funds available to purchase the replacement. Keep in mind that with property prices constantly rising as they are at the moment, you cannot afford to wait too long to buy back in so renting is not really an option.
This may mean that you have to consider a bridging loan – now before you scoff and hit the back button – not all bridging loans are expensive. Yes there are some shockers out there but there are also some very reasonable loans such as a full bridging option with a fixed interest rate and a 100% offset account all with an interest rate of only 4.59% – there are also some very reasonable variable rate options as well.
It may be that you won’t need the bridging option and some loans allow for that. But having the peace of mind that you have finance approval in your pocket not only gives you more bargaining power when negotiating your new home, it takes the pressure off having to accept a lower offer on your selling price.
According to RP Data week ending 28th Feb had auction clearance rate of 82.8 per cent was recorded with 86.2 per cent the week before compared to 77.6 per cent last year. This is the fourth consecutive week in excess of 80 per cent making it the strongest capital city auction market in Australia . According to the report “the Sydney auction market is in uncharted territory now”.
Melbourne’s volume is still on par but clearance rates lag slightly but are still healthy at consistently +75 percent .
As a background to the current Sydney bubble a report from Planning NSW based on the 1990 – 2010 period shows that there had been three clear cycles of population growth and dwelling completions. Where in the third cycle the massive population growth from net immigration was not met by any real increase in construction of new dwellings.
The report shows that in 2009 Sydney’s population was 4.5 million people or 63% of the state’s population of 7.1 million at that time. It suggests that by 2036 the Sydney’s population is forecast to increase to 6 million. Of course this also shows that 37% of the state’s population don’t live in Sydney, something Macquarie St often appears to forget.
It does appear that construction over the period lagged seriously behind growth, largely due to the unattractive return on investment for developers with construction and development costs dramatically rising over 15 years. While investor rental yields struggled to achieve 4% something that is now even more of an issue with current growing vacancy rates. Which is something of a contradiction however the current development boom particularly in high rise apartments may outstrip demand and push rental returns even lower.
Many people believe that low economic growth regulates interest rates however the Planning NSW report clearly shows that historically his has not been the case as the graph below shows the significant variance in the CPI as against the RBA cash rate.