The real estate market in Sydney has experienced a record quarter of sales in volume as well as premium prices. Not surprisingly maybe, the Reserve Bank has started to voice first concerns last week issuing a warning about the rising house prices.
So should we hear the bell ringing already to end this unprecedented boom period or is it just the first round and we are entering a second stage of growth?
January, February and March have indeed been the best months we have seen in the past 28 years in our office. The booming market has been supported by historically low interest rates alongside a falling dollar.
Lower End of Market Particularly “Hot”
Our office has achieved results which are exciting in some respect but in complete contrast to the current business sentiment. The lower end of the market has been the ‘hottest’ with investors and first-home-buyers rushing into one- and two-bedroom units as well as semi-detached homes in the range of 2.5 million to 3 million dollars. In comparison, the 4.5 to 6 million range has been much steadier and less aggressive whereas the well-publicised 20 million plus range has definitely peaked.
As to the Rental Market…
The rental market is a completely different game again. It has somewhat fallen behind making the five-per-cent gross return experienced 12 to 18 months ago a myth. Don’t panic, though, as I predict that this rental market trend will change in the near future, that rents will rise again with land tax bracket creep and blocks of flats that are being sold off by old investors which will create a shortage of investment rental units being sold to owner occupiers.
So What Does All This Mean For the Future Real Estate Market?
If you want to capitalize on the activity, there is still time to participate in this current ‘real estate bonanza’. I suggest, however, that you look at selling in the coming six months. This is not to suggest that there will be a crash after that, but as markets heat up, buyers eventually step back from the heat to observe causing a natural slowdown in activity in the short term.
Another aspect to consider is that if you sell in the peak and buy back in the pullback, you can expect considerable savings on stamp duty and borrowings. It’s important to keep an eye on market trends and to attempt to be ahead of the game.
The slowdown will definitely come and in our case I predict it will middle of the year. This period tends to slow down with less stock on the market – a tendency which we are seeing somewhat earlier this year – and I believe that’s because property owners are reluctant to sell not knowing what they can then buy next, only natural.
Don’t Fear the Fear
Currently some sellers are held back by what we call the fear factor – the fear that the market will continue to run and they won’t be able to re-enter it. The real estate market usually operates according to cycles. It increases and flourishes until it tends to edge past a panic point. After that it eventually levels off again. During the recent boom period we had 20 to 30 per cent growth in some price ranges and this is obviously hard to sustain over a longer period.
Do the Chinese Buy Up All Our Property and Fuel the ‘Race’?
Recently I was invited to the Graham Richardson (Richo) television show on Sky News to discuss the Chinese influence on the market. Yes, it’s real but it’s really the top end that is the most affected by mainland Chinese buyers. The lower to middle end is also experiencing the influence of some Chinese buyers investing money into unit blocks as well as a younger generation of Asians who are here to better their education at our schools and universities.
Interestingly enough this Chinese influence on the market has proven a trend almost uniform across Australia and not only in Sydney. It is reminiscent of what we have seen with the Greeks, Italians and more recently South African families that have migrated to Australia. So overall the current ‘trend’ is not that new or special given that we have experienced something similar with other nationalities in the past as well.
Watch This Space
We have some very interesting properties coming up – some of which you can view HERE.
Should you need any advice on buying, selling or managing property, please don’t hesitate to contact me. I am looking forward to speaking to you about any of your real estate needs.
PS:Our finance division has access to the lowest interest rates on the market currently, so make sure you give a quick call to Daniel Pym, our financial services director, as he could save you a lot of money when investing in property. You can call Daniel on 0412 838 490.
0425 233 488