At $1,027,962, Sydney’s median house price continues to be the highest among the capital cities, according to REIA’s March 2019 Real Estate Market Facts report.
Sitting at 42.4 per cent above the national average, it’s crazy to think the capital city has experienced a fall of 3.1 per cent over the March 2019 quarter and a decrease of 11.5 per cent since March 2018.
“Earlier in the year, based on the then-current rate of decline, it was predicted Sydney’s median house price would fall under $1 million before the end of the June 2019 quarter,” says Tim McKibbin, REINSW CEO. “The last time this happened was in March 2015, when the median house price was approximately $920,000.
“Thankfully, since then we’ve seen the conclusion of the Banking Royal Commission, a relaxing of APRA’s lending policies and a new record-low official cash rate of 1.25 per cent.
“This will hopefully see more properties coming to market, shorter time on market and higher clearance rates – as we witnessed in the weekend following the Queen’s Birthday public holiday.”
Clearance rates rising
According to CoreLogic, Sydney’s clearance rate is strengthening and the next few weeks will be watched closely by market commentators. Additionally, it is an interesting insight into the impact of elections on buyer confidence.
“Since the election, the Sydney property market has seen good, albeit slow, growth,” says McKibbin. “The market is regaining confidence, and this can be seen in the recent clearance rates of over 70 per cent.”
Addressing housing affordability
“Not surprisingly with a cooling market, housing affordability for the three months ending in March 2019 has improved in NSW and across the country,” says McKibbin.
“The proportion of income required to meet loan repayments in NSW has decreased 1.3 per cent, from 36.7 per cent in December 2018 to 35.4 per cent in March 2019.
“Nationally, the proportion of income required to meet loan repayments fell to 30.3 per cent, a decrease of 0.9 per cent over the quarter and 1.0 per cent over the year.”
McKibbin says the Federal Government's recognition of the difficulties facing first homebuyers with the proposed First Home Loan Deposit Scheme is welcomed, however the major barrier to affordability is Government taxes and charges, which exceed 40 per cent on a new property.
“While it’s admirable to see the Government working to address the issue of housing affordability, it is concerning that the banks – who are integral to the success of this scheme – were not consulted,” he says.
“It’s been less than six months since the banks were heavily criticised for their lending practices. So it is risky for the Government to assume the banks will finance prospective purchasers if they haven’t saved the required deposit.
“It is likely that the banks will view the Government-assisted applicants for finance differently to the those who have achieved the deposit without assistance. Accordingly, I suspect this will manifest itself by way of a higher interest rate and other security measures for the Government-assisted mortgagors to reflect the bank’s assessment of their risk profile.
“Government should be looking at the bigger issues now that the market appears to be regaining momentum. Proposing new schemes without addressing stamp duty and GST on new property is not a long-term solution.”
Despite this, McKibbin – and other industry veterans – agree the market is stabilising and, with that, additional confidence is coming back into the market, particularly for Sydney.
“Buyers and vendors should both be pleased with the stabilising influences entering the market,” he says. “With this will come more confidence, which will entice more vendors into the market, providing buyers with more choice.”