If you have been reading my articles over the last few months you would have seen my comments in April about how the Sydney property market is fast turning into one that is similar to London and New York both in affordability, demographics and the style of dwellings. Well it has recently been confirmed that in fact this is now actually the case. Sydney medium house prices have finally hit the $1million barrier, and with record clearance rates, auctions at over 90% and low interest rates many say there is still plenty left in the Sydney market. Sydney’s median is now higher than average house prices in London and is fast approaching that of New York the ‘Domain House Price Report’, released recently says. The median house price has increased by almost $200,000 or 22.9 per cent in a year, which is one of the highest annual growth rates ever recorded by the city. Even exceeding the boom time results of 2001 and 2002!
Besides the changes in housing growth, it is also the style of living that is changing. Just like the major centres of London and New York, apartment living is becoming the preferred option. After a lost decade with little housing investment, Sydney is leading the country’s biggest housing construction boom. Densely populated neighbourhoods near the CBD are at the epicentre of Sydney’s housing boom with one in five of all new homes in the metropolitan area being built within the City of Sydney. New State Government figures reveal that over three times more homes were completed within the City of Sydney’s boundaries during the first seven months of this financial year than in any of the 41 other Sydney councils . The City of Sydney, which covers just 26 square kilometres, is adding new homes at the rate of 100 per week. The figures underscore the growing dominance of multi-unit housing in the Sydney property market. In the first seven months of 2014-15 more than two thirds of all dwelling approvals in greater Sydney were for multi-unit developments.
Sydney’s apartment boom is also spreading across the metropolitan area, with suburbs also doing some heavy lifting when it comes to new approvals. The quadrupling of new apartment approvals in the outer-ring northern districts this financial year showed the boom was spreading to suburbs with the transport links to support it.
The negatives of such high growth is the frustration that young people and those still to get a foot-hold in the market feel especially in Sydney, in trying to achieve property ownership. To most of these people, property ownership appears both unaffordable and well out of reach, similar to both the London and New York markets, which now means that renting becomes the next best option.
With the latest boom in Sydney we are seeing the ripple effect coming into play which basically means the younger generation either accept the “rent” apartment style of living, closer to the inner ring, or ownership by moving further out to areas that are more affordable and have good transport links. The ripple effect is the phenomenon that occurs when prices become unaffordable in a particular area and overflows to the next suburb so on and so on. Sydney’s suburbs outside the inner rings are now experiencing record growth rates.
I have been a long term Property investor in Sydney and it may be boom times at present but like previous cycles it will not last forever and just like the mining boom we have just seen, the bubble will eventually burst. It’s now all about when!
Founder & Non Executive Chairman Chan & Naylor Accountants
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.