Booming prices could be back for Sydney housing after highest monthly growth in two years
01 OCT 2019
Cheap credit and a housing shortage have kickstarted another Sydney property boom, with prices growing at the fastest rate in more than two years and further increases on the way following today’s rate cut.
Figures released Tuesday revealed Sydney’s median home price grew 1.7 per cent over September — the fastest rate of growth since the tail end of the city’s last housing boom in June 2017.
It was the fourth consecutive month of growth in property values after the Reserve Bank’s landmark decision to cut the cash rate in June, according to CoreLogic’s latest hedonic home value index.
And with the RBA announcing a further rate cut today, taking the cash rate to 0.75 per cent, property experts are warning Sydney has entered a new boom.
‘We’re in uncharted waters,” SQM Research director Louis Christopher said.
“There is a new boom and the cut will only accelerate it. We’re expecting a very strong December quarter of sales.”
The median price of a Sydney property — including units, townhouses and detached houses — is now about $805,000, 3.6 per cent higher than it was in May, just before the four month market rally began.
The growth came on the back of a two-year downturn, which meant prices remain 11 per cent below their peak in July 2017, but Mr Christopher said Sydney housing was still “overvalued”.
“The new boom is starting from a point of overvaluation. This will pose some serious questions about how long the market can really go off for … regulators may need to step in.”
CoreLogic head of research Tim Lawless said the recovery in Sydney’s housing market was taking a “V-shape”.
It was a similar situation in Melbourne, where prices grew 1.7 per cent over September and 3.4 per cent over the past quarter after a prolonged housing slump.
Bronte and Tamarama Beach aerial view Sydney NSW Australia
The Sydney recovery is being led by the upper end of the market.
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“Economic and demographic conditions in NSW and Victoria continue to outperform most areas of the country,” Mr Lawless said.
“Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”
Today’s move by the Reserve Bank could put additional strain on buyers, Mr Lawless said.
“There is a risk that lower interest rates could fuel a further rise in household indebtedness as housing credit picks up and investors once again become more active, while higher housing prices are likely to curb participation from first home buyers despite the lower cost of debt,” Mr Lawless said.
(It’s) been a key driver of increased buyer inquiry,” he said. “The other major driver, pushing up property prices over recent months, has been the low number of properties on the market for sale. Homeowners have been reluctant to list their properties due to the lack of choice to relocate.”
SQM Research figures released today showed total listing numbers were down 20.4 per cent from this time last year — usually the busiest time of the year for sales.
Another factor driving the strength in Sydney and Melbourne property markets could be higher levels of investor participation, Mr Lawless said.
Rate cuts could provide a further boost.
The latest housing finance data from the ABS (to the end of July) showed investors comprised 32 per cent of mortgage demand across NSW and 26 per cent of Victorian mortgage demand, which is higher relative to any of the other states or territories.
McGrath Estate founder John McGrath said the rate cuts would be welcomed by the real estate industry.
“Interest rates are a key driver of buyer confidence so today’s reduction in rates will be well received by the market,” he said.