Recent Home Living Property Culture The Team
Recent Home Living Property Culture The Team
Property

Market Update

17-Apr-2018
Few people reading this would be surprised that Sydney property prices have dropped slightly in recent months. Clearly, annual double-digit growth figures can only be sustained for so long – when anything increases in value by 75% over 5 years, a correction is inevitable.

CoreLogic reports that Sydney property values decreased by 2.1% over the year to April. While the Upper North Shore fared better (Median $ Prices of Houses and Apartments over the last 12 months were up 6.2% and 7.2% respectively), certain trends suggest that prices in our area may decrease a bit over the calendar year. Historically, Average Days on Market has had an inverse relationship with Median $ Sale Prices. In plain language: when properties sell quickly, prices tend to rise, and when properties take longer to sell, prices tend to flatten or fall. This makes sense, as Days on Market is a good indicator of Demand (e.g. when several parties have serious interest in purchasing a property, chances are good that the property will sell quicker and at a relatively higher price than if fewer parties have interest).

While sale prices in the Upper North Shore have remained pretty stable over the last 4 quarters, the time taken to sell has been ticking upwards. Of course, this is only a small snapshot in time, but it is one of several leading indicators of where the market is likely heading in 2018.

Natural cyclical forces explain only part of the softer market conditions seen in recent months, however. Debt-fuelled speculation in property has been widespread across Sydney, and government authorities have implemented a variety of measures over the last 2 years designed to put a lid on capital growth.

Such measures include: higher mortgage rates for investors versus home occupiers; limited interest-only lending options, which are favoured primarily by investors; stricter loan-to-value ratios; greater scrutiny of living expenses and borrowing capacities; new taxes and regulations that specifically target non-Australian buyers; and, more diligent policing of illegal ownership by foreigners (e.g. non-permanent residents need to sell once they leave Australia).

The RBA has been concerned about overheated property markets in Sydney and Melbourne for over 2 years now, and some analysts are predicting more initiatives from that will further impact on property prices. Of course, homeowners would naturally like to see the value of their property increase, but we will all benefit from these macro-prudential initiatives if they limit the likelihood of a painful market crash associated with runaway prices.

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