Recent Home Living Property Culture The Team North Shore Living
Recent Home Living Property Culture The Team North Shore Living


Written by Property Analytics

Photo by Samuel Zeller (Unsplash)

Interest rates were at historic lows to start the year, and the RBA dropped them further in May and August, with the aim of encouraging sustainable economic growth. Mortgage repayments for homeowners are now at about 4%.

Historically, low and falling interest rates have contributed to increased house prices. With cheaper debt finance, home buyers are willing to spend a bit more on properties; investor demand tends to rise; property developments become more profitable and numerous; and interest from foreign investors goes up.

Since 2003, the average standard variable interest rate has been about 7%. During those periods where rates were below 7%, Sydney median house prices have grown substantially; when interest rates have been higher than average, price growth has been negligible.

It’s no surprise, then, that Sydney dwellings continue to increase in value. As of June 2016, prices were up by over 11% year-on-year, and up nearly 7% quarter-on-quarter (CoreLogic).

Protection against a Bubble

The Reserve Bank of Australia has been conscious of the affects that low and falling interest rates can have on real estate. Working with banks and government agencies, they’ve introduced measures designed to keep the market from overheating.

Banks now demand higher lending rates and stricter criteria for investors. State governments, including NSW, have increased stamp duty and land taxes for foreign purchasers. And, federal agencies have tightened requirements.

These measures and more have restrained the growth in demand associated with low and falling interest rates, as evidenced by falling investor lending since late 2015.

Impressive results are likely this Spring

A third, very important variable is at play in the market: lack of stock.
Talk to knowledgeable local agents, and they’ll tell you – there aren’t nearly enough quality properties coming on the market to meet demand.

In the first half of 2016, across the Upper North Shore, sales volumes were down by about 25% compared to last year. This lack of supply is pretty consistent across property types, price points, and suburbs, and is undoubtedly contributing to continued price growth.

It was a very slow winter selling season, and feedback from various suburbs across Sydney suggests that listings will remain fairly flat in spring.

Demand remains strong, but with unusually low supply, expect the sellers market that we’ve seen in recent years to continue, albeit with a little less heat to it.

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