As the end of 2011 approaches Sydneysiders can thank their lucky stars that, of all Australian capital cities, theirs has withstood the economic forces that have devalued home prices elsewhere.
One reason is the rush to beat the end of stamp duty concessions. From the start of 2012 most first-home buyers will have to pay full stamp duty on their NSW housing purchases. As a result, the property market is booming.
Next year the stamp-duty savings will apply only to new homes, including those bought off the plan. This is why in September the number of loans for first-home buyers in NSW leapt by 15.9% compared with October.
The action’s pretty hot at Sydney property auctions as well. Auctioneer Peter Baldwin estimates the number of registered bidders at auctions is up by 20% with the number of buyers even higher in the private treaty market. “We're hearing they're paying whatever the asking price is,” he told Domain.com.
Interest Rate Cut Boosts Real Estate Loans
Sydney Morning Herald writer Chris Zappone noted that data from the Australian Bureau of Statistics showed that the number of seasonally adjusted finance commitments for owner-occupied home loans rose by 3.9% over the month of September.
“The number of home loans rose for the sixth straight month in September, with more gains expected to flow through following the recent cut to interest rates.”
As the market had expected, the Reserve Bank cut the cash rate to 4.5% at its Melbourne Cup Day meeting, down from 4.75% where it had rested since November 2010.
Westpac senior economist Matthew Hassan told Chris Zappone that, although the shift by households to pay down debt rather than to gear up further may limit the expansion in the housing sector, there were other factors to consider: "These forces are offsetting the positives of rising household incomes, relatively low unemployment and a shortage of housing stock," said Mr Hassan.
Property writer Carolyn Cummins said on Domain.com that Sydney’s housing market is set for a rebound in 2012. She quoted Mirvac’s managing director, Nick Collishaw, who said: ''In NSW, the culmination of weak residential activity, solid population growth and greater availability of mortgage finance has resulted in a recovery in dwelling construction.
"The RBA's decision to reduce interest rates by 25 basis points will provide some relief for the sector.''
Ms Cummins also quoted BIS Shrapnel's senior project manager, Angie Zigomanis, who said the decline in land activity in 2010-11 had created a rising undersupply in some markets including Sydney.
“With an improved interest rate outlook and strengthening economic conditions expected in 2011-12, new house and land activity would begin to recover in those markets, where the deficiency would be most pronounced,” he said.
Sydney Growth Predicted
Looking for a ‘glass half empty’ outlook on Sydney housing can be a challenge. Even an article by Nicole Pedersen-McKinnon on News.com entitled ‘Gloomy Property Outlook’ noted that, although the Australian Bureau of Statistics data shows values in capital cities fell 1.2% in the past quarter, Sydney is holding up best, declining just 0.2% in the quarter.
Quoting a study commissioned by Financial Review Smart Investor, Ms Pederson-McKinnon added that NSW came out of the study, conducted by Australian Property Monitors, relatively well.
“Of the 100 areas that have recorded the biggest gains in the past year - the most resilient to date - 32 are expected to keep growing in real terms (increasing 3% or more) and 24 of these by more than 5%.”
Market watchers may not all agree on the reasons for the continuing resilience of the Sydney property market, nor are their growth predictions uniform, either with regard to the rate of growth or the timing of the next upwards move in housing prices.
However, the important points on which most property analysts now agree are these:
− The Sydney market has weathered the national downturn in property prices with few negative consequences;
− The RBA’s November rate cut has been an effective stimulus for buyers, teamed with the rush to beat the cut-off of the stamp duty concessions;
− Real price growth will begin in early 2012 due a strong domestic economy with wages growth and low unemployment; and
− The growth in demand for housing will continue without any significant increases in supply.
Sources:
- Lawes, Antony, ‘Sales soar as cut-off nears,’ Domain.com, 11 November 2011
- Zappone, Chris, ‘Home loans continue to rise,’ Sydney Mornng Herald, 9 November 2011
- Cummins, Carolyn, ‘Sydney ripe for more home building’, Domain.com, 7 November 2011
- Wilson, Andrew, ‘Spring surge blooms as home buyers dive in,’ Sydney Morning Herald, 14 November 2011
- Pedersen-McKinnon, Nicole, ‘Gloomy property outlook,’ News.com Property, 6 November 2011
- Armstrong, Mark, ‘Rate cut brings cheer after dose of market reality,’ Domain.com, 6 November 2011
- AAP media release, ‘Housing sector making a comeback,' News.com, 12 November 2011
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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