24 October 2017

Sydney Property Market Update - October

As we enter the spring selling season –  a traditionally buoyant time for real estate sales – we are witnessing the end of the recent boom and a correction to more normal market conditions in Sydney’s property market. Median prices have dropped 1.9 per cent over the quarter to $1,167,516. This is the first time Sydney is in negative growth territory for the past 3 years.

Keeping a Finger on the Pulse

When speaking with local Real Estate agents, we are hearing first-hand the current lack of urgency on the buyer side, both from home owners and investors. The tightening of lending for residential investors through APRA’s macro prudential controls has created a significant decrease in investor demand in the overheated markets. This has had a clear impact in Sydney. Due to the recent exponential price rise, rental yields have compressed down to 2-3%. Investors facing a higher interest rate environment and lower rental yields have begun to look elsewhere for a decent return, cashflow, and capital growth.

Sydney Auctions market update

Sydney Property Market Outlook

Looking ahead to the next 12-18 months, we do not foresee a significant fall in prices. For those sitting on the side line for a bargain, they may be left waiting. This is because there is still a general undersupply of dwellings which will ensure the market does not drop drastically.

Investors trying to predict a market by purely looking at growth statistics, will always be behind the eight-ball. Rental yields or capital growth, looked at in isolation, will not provide a complete picture of the market. Other vital facts and trends are similarly important to achieve a sound investment.

Sound Property has developed an innovative research model that involves a ‘top-down’ approach across three tiers of research. The 15 Key Investment Drivers identify the best markets and properties for growth and rental yield, whilst reducing risk. Rather than starting with a property and justifying it as a good investment, start at a Macro level (ie: city) then move to a Micro level (ie: suburb), and then finally assessing the Property level. For example, if you are buying in a suburb with high vacancy rates, or a city with rising unemployment, then it is likely that the performance of the investment will be severely impacted, regardless of the actual property and its features.

Investor Migration to Alternative Markets

The media may report on the ‘Australian Property Market’ as a single entity, usually referring to Sydney data. In fact, Australia consists of thousands of property markets, doing different things, at different times. There are various national economic factors such as consumer confidence, interest rates, unemployment and wage growth that influence the markets at large. However, there are many other drivers such as supply levels and affordability that can make a specific market move in its own cycle. With Sydney’s apparent rein of price growth coming to an end, we have begun to look for better opportunities further afield.

Contact us today on 1300 655 899 to discuss a property investment strategy tailored to your needs.


This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest.