Look what’s happening to Sydney property prices – Pete Wargent

Believe it or not it’s only four months since property market commentary was focussed on falling dwelling prices.

Comments abounded along the lines of: “Sydney prices continue to fall”, “Sydney property market looks very weak”, “Property market falling in response to Federal Budget” (it must have been a very fast response).

All of this in the face of climbing auction clearance rates and an obvious increase in market sentiment.

One of the fun things about having a Daily Home Value Index – whether or not you believe property prices can be measured on such a basis – is that nerds like me can play around with the data to their heart’s content.

The problem with so much market commentary (particularly the most bearish angles) is that it comes from people staring at charts all day and then scratching their heads when they don’t behave. Theories such as ‘more properties being sold into a falling market’ abound. What’s missing is the most vital element: the human one.

The latest surge has been blamed on all kinds of stuff including a “new (?) Chinese buyer phenomenon” amidst other things.

Anyone who actually buys property will Sydney will tell you what the actual reasons are: a fiery combination of low interest rates and poor fixed interest returns, a real estate market with roaring population growth which has underperformed household income growth for 9.5 long years, and the biggest driver of all – the fear of missing out on the next boom.

Anyway, I thought I d have some fun by drawing up a Sydney 4 month dwelling price chart courtesy of RP Data.

Not much sign of an adverse consumer reaction to the budget there then, with dwelling prices up by $62,490 in the last 123 days to above $710,000, and heading further north by the day.

That’s an average price increase of $508 per day for 4 months on the bounce.

Note in the second chart below how the daily increases in recent weeks have been remarkably smooth.

A lot of guesswork involved here, of course, but intuition tells me that RP Data can see where this chart is heading very soon and that is closer to $800k than $700k.

And, from what I’ve seen at auctions in recent weeks, I wouldn’t be at all surprised.

Cash buyers, Asian buyers, downsizing Baby Boomers and investors all piling into the inner 10km ring medium-density stock (and crowding out first homebuyers in the process).

With mortgage repayments very comfortably repayable for investors at this time, that is a heady mix which is seeing well located properties sell for miles over reserve at auction.

 [sam id=29 codes=’false’]

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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


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