SYDNEY house prices rose over the April quarter and homeowners can expect house prices to rise over the May quarter according to the latest report by Dr Andrew Wilson, senior economist for Australian Property Monitors.
The latest Australian Property Monitors research reported in the Sydney Morning Herald has revealed that Sydney house prices rose 1.1 per cent over the April quarter. This followed a fall in house prices of 0.6 per cent over the March quarter.
The biggest contributor to the April rise in house prices came from the top 25 per cent of the market, which increased by 5 per cent. The upper-middle price sectors rose by 1.7 per cent while the bottom 50 per cent of the market recorded no rise in median house prices over the April quarter.
Sydney median house price growth will continue to be driven by the influence of the underlying housing market fundamentals.
Rising incomes as a consequence of low unemployment and emerging shortages of skilled labour will provide buyers with increased incentive, capacity and confidence in the housing market. The Bureau of Statistics reports that Sydney’s April unemployment rate was 5 per cent compared to 5.7 per cent a year ago; 42,280 jobs have been created over the past year in Sydney and NSW annual private sector incomes have increased by 4 per cent.
Increased demand for labour will be driven by the unprecedented resources boom driving the through an estimated $380 billion investment in mining over the next five years.
The benefits of this strong economic growth will ripple throughout Australia, especially Sydney, as it re-energises as the commercial centre of Australia.
Growing population and increased immigration to meet skill shortages will continue to fuel demand for housing in a city already constrained by a tight rental market and chronically low levels of new home building.
According to the Real Estate Institute of NSW, the rental vacancy rate for suburbs within a 10-kilometre radius of the CBD fell 0.2 per cent to only 0.9 per cent in April. Sydney just has too many people and not enough houses, with no relief in sight.
Official interest rates are expected to remain on hold in the short-term as key measures of economic growth and inflation continue to remain within the Reserve Bank’s neutral policy band. Mortgage interest rates and lending costs for new borrowers are currently under downward pressure as competition between banks intensifies as a consequence of dwindling credit growth.
With incomes rising, a shortage of housing and the pressure off interest rate rises in the short term, the fundamentals are signalling increased home buying activity in Sydney through 2011.
Dr Andrew Wilson is senior economist for Australian Property Monitors, a division of Fairfax Media.
Source: Sydney Morning Herald.
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