Record price growth during the June quarter pushed seller expectations beyond buyer capacity, with an emerging blame game from disappointed bidders in booming auction markets focusing on China buyers and agents over-quoting. Strong prices growth was naturally fertile ground for the revival of the doomsayers housing bubble predictions.
Sky-high market sentiment however quickly reversed following unprecedented policy initiatives by the Australian Prudential Regulatory Authority that resulted in higher interest rates firstly for investors and then for owner-occupiers later in spring. A sharp decline in investor activity and growing buyer wariness generally pushed the market down from record highs over autumn to its lowest levels since 2012.
Q2. What is going to influence or impact the way you do business in 2016?
Although the housing market ran out of steam through 2015, there were clear signs through December that the market correction over spring had bottomed out with auction clearance rates stabilising.
The Sydney housing market will continue to operate in a positive economic environment with the local economy clearly continuing to be the best performer of all the capitals. Unemployment rates continue to fall, jobs growth is strong and job seekers and investors will continue to be attracted to Sydney despite the barriers of relatively high cost of housing.
The Sydney housing market remains undersupplied despite significant construction, particularly of units, over the past 3 years. Vacancy rates for houses remain tight providing upward pressure on rents, although higher numbers of units will provide more choice for tenants for this dwelling type.
Demand from international buyers, particularly from China, can be expected to increase through 2016 driven by perceptions of a capital safe haven, solid property markets and continuing close economic and cultural ties to the local market.
Interest rate outcomes through 2016 are likely to be largely benign overall following the dramatic changes through 2015.
Q3. What is your prediction for the market in 2016?
The Sydney housing market has recorded three consecutive years of prices growth of 15 percent per year which has resulted in a remarkable median house price above $1 million.
Prices growth through 2016 however, will be considerably less than recent boom time results with the Sydney median likely to increase by around 4 percent over 2016.
Decreased activity from investors plus affordability barriers through recent record prices growth will see outer suburban regions to the west of the city as underperformers through the year. Prices growth however in these areas will still be expected of between 2 and 3 percent over the year.
House prices in inner and middle suburban regions to the west, north and east of the city can be expected to record the highest prices growth generally next year of between 4 and 5 percent. Sydney’s prestige property market, having revived through 2015, can be expected to continue its recovery with solid prices growth emerging, particularly if the stock market lifts on the back of a lower Australian dollar.
Following the extreme peaks of recent housing market cycles, the Sydney can now be expected to record more moderate outcomes from cycle to cycle. This reflects the general low growth, low yield, low income and low interest rate environment of the national economy.
Moderation in the nature of house price growth cycles however will provide more certainty to buyers and sellers, with stable sentiment reflecting individual buying and selling decisions rather than concerns over the state of the market. This can only be a positive for the sustainability of the local real estate industry.