Analysts of the Sydney property market are poring over late-2011 statistics looking for clues to what will transpire in the coming twelve months. Of growing interest is the topic of when the much-discussed ‘recovery’ in Sydney property prices will begin.
Sydney property prices don’t really have much ground to make up. Data from Australian Property Monitors show that the national median price for houses over the year to October 2011 fell by just 1% compared with the previous year, and median Sydney prices actually rose over the same period – by a miniscule 1% but up nonetheless.
2011 was a Year of Correction
Between January 2009 and June 2010, Sydney's quarterly median house price rose by nearly 20%. This pace couldn’t last forever, and it didn’t; the market has now paused to take a breather.
But if 2011 was a year of correction, will 2012 be a year of recovery?
An AAP media release appearing on the News.com website reported on a Property Council-ANZ Bank survey of 2800 property industry professionals conducted in December 2011.
The survey measured the confidence real estate professionals had about demand from investors for property in each state.
Nationally, confidence was up slightly from the 104 points measured in September, to 107 points. NSW slipped from 107 points in September to 105 points in the latest survey.
Investors would no doubt be seeking to tap into the high rents being secured from rental properties in those areas affected by high-paying mining activities, and that doesn’t include NSW.
Market’s Underlying Strengths remain
Elsewhere there are indications that the Sydney market retains its underlying strengths and that these will create an upturn in property prices not anticipated by the Property Council-ANZ Bank survey results.
In its ‘Minutes of the Monetary Policy Meeting’ of 6 December 2011 the Reserve Bank stated: “Looking forward, market expectations were for another reduction in the cash rate at the December meeting, with further reductions anticipated by the middle of the coming year”.
Stable or even decreasing interest rates are always beneficial to the property market, even if the response to the two recent rate reductions has thus far been less enthusiastic than expected.
Next consider the housing supply situation. The National Housing Supply Council, appointed by the Federal Government, has just released its third annual report.
The council estimates that, over the course of 2009-10, the gap between underlying housing demand and supply widened from about 158,000 dwelling units to about 187,000 units.
The council further estimates that this gap will rise to about 329,000 dwellings by 2015 and blow out to over 600,000 dwellings by 2030. It says that about 40% of the present gap is in NSW and the situation is likely to continue well into the future.
Home Loan Approvals Trend Upwards
In the meantime, home loan approvals have been trending upwards, according to an AAP report on the December figures from the Australian Bureau of Statistics.
In the report Nomura chief economist Stephen Roberts said the strongest region for housing finance was NSW, with a 1.3% increase, after a 4.3% increase in September.
He said the growth in NSW was indicative of how home ownership was becoming a favoured option, given rental costs: "Rents have been quite high, so the economics of buying a house instead of renting are very much in favour.
"It's a market that's climbing back, and it's been helped by the cut in rates."
Figures from the Australian Bureau of Statistics also show that the number of owner-occupier housing loans in NSW rose by 8% over the 10 months ending October 2011 compared with the same period in 2010.
Rismark director Christopher Joye said in the Sydney Morning Herald that he also thinks the home loan approval figures augur well for property values.
"The best proxy for housing demand - the number of new home loans approved for purchasing established properties - has risen robustly every month since its nadir in March," he said.
Dr Andrew Wilson, senior economist for Australian Property Monitors, says that Australian capital city housing markets are set to record growth in median prices over 2012 as the national economy gathers strength.
“The Australian economy is primed to expand strongly on the back of a significant resources boom with the Organisation for Economic Cooperation and Development predicting gross domestic product will increase by 4% over the year,” he said in Business Day.
Writing in the Sunday Telegraph, Financial analyst Mark Bouris said that 2012 will see the property market make a comeback: “Property is an asset measured in 10-year cycles and there has not been a decade since the end of World War II where property values have not risen.
“Modest asset growth will return when you measure it decade by decade – we just won’t see the asset inflation we saw in the 2000s.”
2012 will be the year that the Sydney property market recovers from what will soon be seen as ‘the correction of 2011.’
Sources:
- ‘Fortune favours the resource rich – survey,’ AAP report on News.com, 12 January 2012
- ‘Counting eggs before they hatch,’ Chris Vedalgo, The Age, 11 January 2012
- ‘Surprise lift in home-building approvals, but housing sector still weak,’ AAP report in Herald Sun, 10 January 2012
- ‘Revelations of a housing disaster,’ Bernard Keane, Business Spectator, 22 December 2011 (updated 3 January 2012)
- ‘Australia's still raising the real estate roof,’ Andrew Wilson, Business Day, 31 December 2011
- ‘Capital city house values finally on the up - but only just,’ AAP report on News.com, 30 December 2011
- ‘Home loan approvals continue upward trend,’ AAP report on News.com, 12 December 2011
- ‘Your house: Is it over-valued?’ Mark Bouris, The Sunday Telegraph,15 January 2012
Philip Keeffe - Phil Keeffe is an Australian journalist originally from California who has lived in Sydney since 1968. His communications background ...
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