From an investor’s point of view, when analysing last year’s Sydney property market and trying to determine its likely path in 2018, we first need to look briefly at where we have come from and how we got here. This can often help make sense of what to expect moving forward. The recent years of strong growth have taken many experts by surprise, but at the end of the day, it’s funny how common sense can easily explain it.
This recent growth was precipitated by the Global Financial Crisis (GFC), which was primarily caused by irresponsible lending practices in the United States and many other western countries, including Australia. The GFC put an irregular dent in the normal cycle of things in our property market. As a result, when the issues that started it began to be absorbed by the market there was an initial element of recovery, then the more organic growth of the normal cycle began and prices moved forward more confidently. This happened across the board in Australian property, as the circumstances at this point were global. These circumstances don’t happen often, so it makes what occurred recently with price increases appear greater in the short term than they are when examined over the longer term.
The reality is that property prices never grow constantly and markets always perform over cycles, so we should look at them over longer time frames to interpret how they are likely to perform in the near future.
It’s always a good start to look at some market data broken down into the major cities to give an indication of trends. The Sydney market, while very strong over the longer term, is currently not growing at the rates of some other cities (particularly Melbourne). However, the median dwelling price is much higher, and it has grown more over recent years, and there is always more activity. Sydney is Australia’s biggest market, after all.
The basic driver of prices is relative supply and demand. In Sydney, the gap is at an all time high, and it is a gap that cannot be changed easily in the short to medium term. This means that while we are having a brief reprieve don’t expect significant upward pressure on prices to change any time soon, until the fundamental problem of dwelling supply, relative to demand, is reduced, hence taking pressure off prices.
Recent immigration rates are also fuelling the increase in housing demand, as this demand is not being spread evenly across the country. Most immigrants are settling in the major capital cities, adding to housing pressures.
How this affects the areas of the north-west of Sydney, such as the Hawkesbury and the Hills, is marked. Over the past few years we have seen increases in housing densities to create a greater supply in our area. This has also occurred in most other areas of Sydney, but seems more noticeable in our area. Many of them are changing from rural landscapes to residential and often high density residential.
This will certainly have an impact on the prices of all property types over the long term, as our area continues to become a more desirable place to live for more people. The addition of infrastructure to support this increasing population also needs to continue, which, while adding more amenity to our areas, adds value to the quality of the area.
As an investor, when deciding on the best times to buy or sell, it is very difficult to be Nostradamus and predict the future. However, when you look at the trends and what causes them over the long term, you can see more clearly if an area will become a more or less desirable place to live. This tells us if prices will rise or fall over the long term, and as a result tells us if we should be buying or selling, because you won’t be the only one to think it!

Article provided by Sue Gartlacher of Park Lane Property Group.

Subscribe for one year here or via iSubscribe for $39.95 to receive a premium coffee-table magazine delivered each season.