Sydney’s property prices have not yet run out of puff, with houses and apartments yet to reach their peak, a report from a national valuation company shows.
While Melbourne has now reached the top of its potential price growth, homeowners in the Harbour City can expect further capital gains, according to Herron Todd White’s July report.
But it’s unclear when prices will peak, with the Hills District still seeing significant prices growth for sites near the North West Rail Station and other areas recording high auction clearance rates, Herron Todd White residential director for Sydney Kim Quick said.
“This week is slower than last week because of the Federal Election, but once that has settled we’ll see the uncertainty finish and September and October will be strong,” Ms Quick said.
“I don’t think [prices will fall] unless there’s a massive global change, employment changes or there’s a massive increase in interest rates,” she said.
Prices will continue to creep higher into next year.Shane Oliver, AMP Capital
The report pointed to price growth in 2016 being “slower than previous years” but noted there had been consistent solid price growth in the ‘value band’ – around $500,000 – across the metropolitan area due to investor and entry-level owner occupier demand. But across Sydney, opportunities at this level – about half Sydney’s median price – are limited.
Buyers could consider one-bedroom apartments with a car space in Waitara and Lane Cove for this price point, while in the eastern suburbs studios without parking can be bought for the same price.
And even in the more affordable south western suburbs, where 12 months ago opportunities below $500,000 were available in Ashcroft, Busby, Miller and Cartwright, homes at this price have “quickly evaporated”.
Should prices growth continue as expected, these budget buys will also soon be priced out of reach.
This continued growth in Sydney “surprised everyone,” NAB chief economist Alan Oster said.
While the Sydney market was largely thought to have peaked at the end of 2015, these expectations were premature.
“At the end of last year we expected 1 per cent [property price] growth, and it’s already at 8 per cent,” Mr Oster said.
“Sydney surprised everyone by its strength in the last couple of months,” he said. “The growth will probably continue for a little while,” he said.
And prospects of falling property prices after the market does reach its peak are less certain, Shane Oliver, chief economist at AMP Capital said.
The rate of property price growth peaked last year but property prices are unlikely to fall until interest rates start rising, Dr Oliver said.
“There have been lots of predictions of peaks and reports of property prices falling, but … prices will continue to creep higher into next year,” he said.
For now, the outlook of the market hangs on whether there will be a new government and the future of negative gearing, Domain Group chief economist Andrew Wilson said.
As a result of the political uncertainty, it was “unlikely” there would be another interest rate cut that would spur on the market.
“I’m not sure first-home buyers will be celebrating the rebound of the market over June,” Dr Wilson said.