2018 SYDNEY HOUSING MARKET UPDATE - WHAT TO EXPECT
By Bernie Tynes
A weaker Sydney property market is expected in 2018 as prices begin to drop slightly due to recent increases in supply as residents move to other parts of the country, demand cools and shifts occur in the lending environment. Foreign investment over the past five years is beginning to slow as restrictions on funds and policy changes take effect. There are now signs that we have moved into the next phase of the property cycle as price growth stabilises, auction clearance rate begin to fall to multi-year lows and lending to investors has slows significantly.
Residential dwelling prices are significantly influenced by financial pressures from the Reserve Bank on Interest rates (which are expected to remain at 1.5% throughout 2018) and more importantly economic measures by APRA (Australian Prudential Regulation Authority) continue to tighten interest-only lending along with the levels of household debt. As unemployment and subsequent loan defaults remain low and our banking industry remains healthy, the chances of a rise in interest rates decrease. This factor is supported by increased housing demand of 174,000 homes per year as our population (net migration) continues to grow at a rate of 240,000 per annum. Source: Australia Bureau of Statistics.
Quick Sydney House Stats (December 2017):
- Annual Sydney change in dwelling values +5% (Melbourne +10.1%)
- Annual change in values (Houses) +6.5% vs (Units) +4.4%)
- Quarterly change in dwelling values -1.3% with declines accelerating each month over the past 3 months. This is a fairly minor decrease to date given the 75% increase in property values seen over the past 5.5 years
Whilst these factors point to a weaker housing market, there are a number of reasons to believe that any reductions in the value of properties in Sydney are likely to be moderate. The mortgage rate is expected to remain stable until 2019, the labour market continues to improve and unemployment generally is reducing. As values fall and population increases, the demand for properties in Sydney is expected to remain strong. Source: Core Logic