Buyer confidence set for a surge
Sydney home buyers should brace themselves for a spring surge in property prices, following the "hottest winter ever" in auction clearance rates.
That's the view of Australian Property Monitors senior economist Andrew Wilson, who says August had the highest auction clearance rate of any month on record.
Dr Wilson says Sydney still has the most expensive housing of any Australian capital, and is expected to "smash through" the $700,000 median house price barrier over the September quarter. The median price for units is also set to rise, breaking through the $500,000 mark for the same quarter.
Dr Wilson says Sydney out-performed all other Australian capitals during each of the three phases of the property cycle in the past three years. "All housing markets went through a correction phase in 2011 and Sydney prices were not as badly affected as they were in other cities," he says.
"In 2012, the market generally went through a recovery phase and Sydney recovered faster than the others. Sydney has tended to have lower rates of unemployment than other cities. Local unemployment rates affect confidence, and generally in Sydney we are seeing a higher level of confidence.
"In 2013, we are moving back into a growth phase and Sydney continues to be the best-performing capital city in terms of house prices."
Dr Wilson says there are many reasons why the Sydney property market is so strong. "Obviously people are attracted to areas where there are good employment prospects, but also, there is a big incentive for people to buy their own home in Sydney because the rents are so high."
He says the median weekly rent for a house in inner-city areas is $500, making it the most expensive rental market of all the capitals.
For buyers, the most expensive areas of Sydney are the eastern suburbs, lower north shore and parts of the northern beaches. And while these areas always perform well, there is less competition in the "prestige market" (above $3 million).
So where are the opportunities for first-homebuyers? According to the Australian Bureau of Statistics, Sydney now has the lowest proportion of first-homebuyers of any capital city. Dr Wilson says one reason for this is that many of those buyers bought last year because of changes to the State Government's first-homebuyer grants.
"Another main reason is that Sydney first-homebuyers are competing with the investor market for the same properties. At the moment, we are seeing a national flight to bricks and mortar investment," he says.
House hunters shouldn't be disheartened however, with mortgage interest rates at a record low.
The Sydney housing market is also a world leader in terms of its "resilience and robust nature", says Dr Wilson.
"There is still plenty of affordable housing in the middle-fringes of the western suburbs. Suburbs like Mt Druitt, St Marys and Macquarie Fields are becoming gentrified and increasingly popular with a broader range of buyers. You can still buy a three-bedroom house in those spots for less than $400,000."
He says first-homebuyers are also snapping up apartments in inner-city areas for entry-level prices starting at $350,000. "It's not just because apartments are more affordable, it appears to be a lifestyle choice. The young ones want to live in cosmopolitan inner-city areas and don't necessarily want a backyard."
Frequently Asked Questions about this Article…
Australian Property Monitors' senior economist Dr Andrew Wilson says Sydney is poised for a spring surge after August recorded the highest auction clearance rate on record. Strong employment prospects and a lucrative rental market are boosting buyer confidence and driving demand across the Sydney housing market.
Dr Andrew Wilson expects Sydney house prices to 'smash through' the $700,000 median house price barrier over the September quarter, while the median price for units is set to rise above the $500,000 mark.
The most expensive areas for buyers are the eastern suburbs, the lower north shore and parts of the northern beaches. The article refers to the 'prestige market' as properties above $3 million, where there is typically less competition.
High rents are a major incentive to buy in Sydney. The median weekly rent for a house in inner-city areas is about $500, making the rental market the priciest among Australian capitals and encouraging renters to consider purchasing instead.
Yes. The article notes more affordable opportunities in the middle-fringes of western Sydney — suburbs like Mt Druitt, St Marys and Macquarie Fields — where you can still buy a three-bedroom house for under $400,000. First‑time buyers are also snapping up inner‑city apartments with entry‑level prices starting around $350,000.
According to the Australian Bureau of Statistics and Dr Wilson, Sydney now has the lowest proportion of first‑homebuyers of any capital city. Many bought last year following changes to state first‑homebuyer grants, and current buyers are competing with a national investor trend — a 'flight to bricks and mortar' — which increases competition for the same properties.
Dr Wilson says Sydney out‑performed all other Australian capitals through each phase of the property cycle over the past three years: a milder correction in 2011, a stronger recovery in 2012, and a return to growth in 2013. Lower local unemployment and higher consumer confidence have helped Sydney lead the pack in house price performance.
While prices are rising, the article highlights positives: mortgage interest rates are at record low levels and the Sydney market is described as resilient and robust. That said, buyers can still find affordable options in middle‑fringe suburbs and entry‑level apartments, so opportunities do exist despite strong competition.
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