E-newsletter-July-2017

THE SYDNEY MARKET

By David Servi

Winter means woolly socks, hot soup, shorter days and now, in Sydney, hanging fire on real estate sales. The middle of the year, with its cooler and shorter days, has traditionally been a little slower for real estate sales in Sydney, but the current market shortage has little to do with seasonal temperatures.
 
According to analysis reported by the Sydney Morning Herald earlier this month, Sydney has an acute shortage of properties for sale. With a population of about five million - if the Central Coast and Blue Mountains are included - Sydney has fewer homes for sale than Brisbane, a city less than half its size. Perth is an even smaller town, and listing numbers there are about the same as Sydney’s.
 
Spencer & Servi director David Servi says there is no shortage of buyers on the Sydney scene, and they are hungry to purchase a property.
“Because there is so little on the market, sellers are getting  good prices”, he explains. “I don’t think there’s any problem with selling at the moment. There are always people with sufficient purchasing power who want to buy”.

Even back in the dark days of rocketing interest rates in the late 80s and early 90s, Sydney real estate was moving, he adds. In 1986, then prime minister Paul Keating warned Australians the nation was in danger of becoming a banana republic, and yet, David remembers, the seemingly unstoppable Sydney real estate market continued to turn over.
 
The sharp increases in Sydney’s property values in recent years could be keeping potential sellers from putting their properties on the market, he thinks, simply because they fear that replacing the property they own with a similar or better property could prove financially difficult.

Whatever the reasons, David says Sydney is now a sellers’ market, and potentially a lucrative one, simply because the pool of properties available is so limited. Property-owners at every level have been enjoying remarkable returns when they sell, so it’s all the more surprising that the market is so tight.

The shortage of houses and apartments for sale could be the result of more general economic uncertainty, or doubts about recent policies announced by both the NSW government and the federal government to address that political hot potato known as “housing affordability”.  
These “affordability” measures, intended to help first-home buyers and slow sales to foreign buyers and property investors, have created uncertainty in the market. Potential sellers may be waiting to see how these policies play out in the new financial year.

Most experts, though, expect the measures to be largely ineffective in dampening property price growth driven by the city’s ever-increasing population, growing at an estimated 90,000 people per year, and the natural limits to its size, such as the enormous national parks to the south and north and the ocean to the east.

With low interest rates and an uncertain world outlook, investors are still banking on Sydney real estate, which in the long term, history shows, will carry on increasing in value.