Affordability and apprehension over further interest rate rises will be a dampener amidst an otherwise promising setting for growth in the harbour city
The Sydney property market is currently divided into two very distinct categories; the prestige property market, where sought-after real estate is skyrocketing month on month; and the lower end of the market, where property prices are flat-lining – and in some cases, even retracting in value.
However, this imbalance is set to correct itself, according to residential property researcher. Braxton Chase CEO Andrew Donnelly says that the prestige market will continue to power ahead as it has done over the past two years – however, he also predicts that the flatter western and southern Sydney markets will soon begin to flourish as well.
“An ultra-tight rental market – one of the tightest on record, in fact – is continuing to drive up yields, [which is] arousing investor interest,” Donnelly says.
“With construction at its lowest levels in decades, an undersupply of new housing is looming. These are two stimulants likely to kick the rest of the market to life, particularly in the languishing west and south western suburbs.”
Investors will need to be patient, he warns, as a recovery won’t happen overnight.
“The signs of a comprehensive market recovery in Sydney are all in place, but we don’t expect the ball to start rolling until late 2008,” Donnelly says.
“On the bright side, though, prices in many areas are as low as they will get, meaning it’s a buyers market.”
The timing might be right for investors to buy into older stock to redevelop or subdivide, in light of the recent Planning Reform Discussion Paper released NSW Minister for Planning, Frank Sartor. The paper contains more than 90 recommendations devised by the government to improve the planning system, including faster processing times, improved systems, and increased online planning information and support.