Sydney market in the spotlight
A great deal of talk in the media about housing affordability this week and what should be done about it, including a ream of band aid solutions, mainly targeted at Sydney.
In most locations around Australia, mortgage serviceability is not remotely stretched with mortgage rates available from around 4 per cent – and the ability to fix interest rates at around 4.5 per cent for five years.
Of course, it is true on the other hand that the Sydney housing market is becoming more expensive almost by the week.
But then really, what did people expect with policies which promote such rampaging population growth? That Sydney house prices would fall?
Sydney to 5 million
As expected with net interstate migration from New South Wales declining to the lowest level on record Greater Sydney’s population surged by a record 84,230 to 4.84 million in FY2014, and the population of Greater Sydney will surpass 5 million within the next year.
Thus despite what some bloggers have interpreted to be a risk of looming “oversupply” of properties, I’m presently of the view that this construction market cycle will likely pass with only a few pockets of significant overbuilding in Sydney (such as unit developments around the airport, and a few transport hubs).
SQM Research released its latest vacancy rates figures for the month of May 2015 today, which showed Sydney vacancies remaining tight at 1.8 per cent.
I’ve run a little analysis here previously on where the vacancy rates in inner ring Sydney are creeping up, and where they are not.
Only Hobart of the capital cities now has a tighter rental market with a vacancy rate of 1.5 per cent.
In the month of May vacancy rates crept up in Adelaide to 1.9 per cent, in Melbourne to 2.3 per cent, and in Brisbane to 2.4 per cent.
Vacancy rates in Canberra have held steady at 1.9 per cent.
The highest capital vacancy rate remains in fragile Darwin at 3.5 per cent, but Perth is now running the Top End capital close with its vacancy rate jumping from 3.0 to 3.4 per cent in May.
While rents in Sydney continue to rise at around 3 per cent per annum – another indicator that oversupply is not a pressing issue – asking rents have been declining in Darwin, Perth and Canberra.
Asking prices skyrocket in Sydney
SQM Research has also recorded a huge surge in asking prices in Sydney.
Over the three years, asking prices for all Sydney houses are up by 30 per cent and units by 26 per cent.
In particular, 2 bedroom units have seen asking prices booming, up by 32 per cent in only 36 months.
Despite the Sydney property boom, the latest round of Reserve Bank Board Minutes for June 2015 confirmed that property markets would present no barrier to interest rates being cut once again if required. Asserted the Minutes:
“Conditions in the housing market in Sydney and parts of Melbourne had remained very strong, though trends were more mixed in other cities.”
And, indeed, the Reserve Bank shed more light on its thoughts relating to housing:
“Noting that housing price growth in other cities and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market.
They also observed that there was a relatively low stock of dwellings for sale in Sydney and Melbourne and that dwellings took only a short time to sell.”
The Board Minutes also noted that, just as we looked at in the Housing Finance data here, New South Wales mortgage approvals are now rising sharply for both owner-occupiers and investors.
For Sydney, it seems that all bets are on.