This is a question that I’m asked quite frequently. Has the Sydney residential property market peaked? Is the Sydney market going to collapse? What is going to happen to prices 2018? Are we going to follow the US and UK markets post GFC?
I’ll start by stating that as a mortgage broker, I am not qualified to provide you financial advice. But further to that, I don’t have a crystal ball that assures me that I know what is going to happen, otherwise instead of reading this article we’d be having this in conversation over cocktails on the back of a boat in the harbour at Monaco.
Instead, I will observe a few key things though, and from there I will let you form your own opinion…. and I’d encourage you to share it!
1) Jobs & Growth
When I say Sydney has fundamental problems, I mean this in a good way. There are numerous opportunities for Sydney to grow and become more efficient, and the good news is that we are starting to see this play out.
I’ll name just a few big infrastructure improvement projects; WestConnex & NorthConnex, Badgery’s Creek Airport, Sydney metro line and the Light Rail line expansion. Anyone who has tried to navigate Sydney traffic in recent times will attest to how poor traffic is, but the effect has been compounded while these projects are being developed.
All these infrastructure projects inject investment into the local economy via creation of jobs and ultimately delivers better efficiency for the city once these projects are completed.
Add to this we continue to see low employment (4.6% for NSW as of Nov-17 ABS figures) which is a very healthy sign. Further to this Sydney is strongly anchored into high value industries like financial services which makes it an attractive place to live for those who want to earn high incomes.
2) The Nature of the Property Market
People tend to talk about the residential property market as a collective, like the share market. It seems to reported almost daily by mainstream news how things have “cooled off” and the market has “peaked”.
But let’s dig a little deeper. The “property market” is made up out of hundreds of unique transactions that occur every single week; on market, off market, auctions, you name it.
What is different from this market from a share market? Obviously residential property does not have the same volatility of shares on the stock market which hinge on daily announcements with traders and investors speculating. But even if that same behaviour existed in property, would it change things?
Well no because fundamentally the liquidity of the asset is completely different. You can buy and sell shares within a minute with little to no cost (just the royalty you pay on your trading platform). With property you’ve got high transaction costs; both when you buy with things like stamp duty and CGT and agent costs when you sell.
The other key difference is (unless you’re Warren Buffet) it is exceptionally hard to add value to shares/stocks. With property, you’ve got the ability to add value through renovation, development, even styling to help increase the cashflow or value of the asset.
3) Sydney is an awesome place to live!
OK, maybe this is just an emotional one. But I genuinely believe this!
For me and my family we will always call it home because we think it is a great place to live.
We’ve got one of the most beautiful harbours in the world, and for those who have not had the opportunity to travel abroad we really do punch above our weight as a city on the world stage. It is a beautiful, clean and safe city that people not only want to visit but to live in.
There has been lots of press about our proximity to Asia and in particular investment from China. We’ve seen this manifest in overseas buyers and that chapter has subsided for now with new regulations, but it certainly has not dampened tourism or immigration for that matter.
Plenty of people want to visit and live in our city and for me, that suggests that there is always going to be strong demand for our real estate.
So enough about what I think, what do you think?
One of the reasons we love living in Sydney!