Considering some commentators are suggesting it’s too late to get into the Sydney property market John McGrath recently explained his views on where the harbour city is in the property cycle saying that even if Sydney comes off the boil for now, not to lose faith.
The past year in Sydney real estate has been a really exciting time.
The market has been in full recovery mode and the hottest I’ve seen it in many years. However, people are now starting to talk about it being all over.
RP Data reports 0.5% growth in Sydney home values (houses and apartments combined) for the month of April, which is quite a bit lower than the 2.8% we saw in March; and the lowest monthly reading we’ve seen since June 2013.
It’s worth noting that the April numbers might be a blip, given we had two long weekends that directly impacted activity. Alternatively, it could be the first statistical sign that the market has moved past its peak.
This doesn’t indicate it’s ‘all over’.
I’ve been doing this for over 30 years and I can tell you recoveries never occur in a straight line. We often have a bull run at the start; then after a period of great growth, it eases off.
Buyers become concerned they’re going to pay too much, others get sick of missing out and take a break. Demand comes off the boil and price growth slows. And that’s the key. It slows, it doesn’t stop or go into reverse.[sam id=43 codes=’true’]
It’s very healthy for markets to take a breather now and then during a new growth cycle.
That’s how price bubbles are prevented. We saw 14.5% growth in 2013.
At the start of this year, I was tipping 5-10% growth with an inevitable decline in the frenzied activity of 2013. Sydney achieved 4.1% in the first quarter.
If we have just 0.5% growth every month for the remaining nine, we’ll end up with 8.6% for the year. That’s good, steady growth.
Last year, the strongest segment in Sydney was inner city and beachside markets between $750,000 and $2 Million. Now, we’re seeing more activity in the higher price brackets and RP Data’s research confirms this trend.
As with most market recoveries in Australia, what happens in Sydney eventually happens everywhere else. If Sydney is starting to slow down overall, other markets are probably about to heat up.
Now it’s Brisbane’s turn
For example, Brisbane is right on the cusp of its next growth cycle, recording the second best growth of all the capital cities in April at 1.1%.
We’re now seeing more investors from Sydney and Melbourne in South-East QLD as they realise the better value for money and stronger yields available compared to their home cities.
RP Data’s senior research analyst, Cameron Kusher agrees.
He says: “Brisbane is going to be the strongest housing market going forward and that is purely because the gap in pricing between Sydney and Melbourne compared to Brisbane has really widened and that was always the thing in the past that attracted people to Brisbane.”
Buyers shouldn’t lose faith in Sydney, even if the market is coming off the boil for now. It’s a premium market in one of the world’s great international cities and anyone would want to own property there.
But if affordability is starting to sting, Brisbane is a fantastic option and definitely my pick for the best growth among Australia’s capital cities over the next couple of years.
This blog was initially posted on Switzer.com.au
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