PHOTO: Domain House Price Report
Sydney house prices rebounded over the September quarter, up 1.2 per cent to $1,154,406. Houses have regained just over $13,000 of the almost $22,000 value lost over the June quarter, and are now about $43,500 below the mid-2017 price peak. Despite house values rising modestly, the pace of quarterly growth was almost four times lower than the same time last year. Sydney unit prices continued to decline over the September quarter, down 0.2 per cent to $732,423, although the depth of decline is significantly lower than the previous quarter. Unit values are roughly $56,000 below the mid-2017 peak. The divergence of median house and unit prices has pushed the gap to the largest on record at 58 per cent. This widening price gap will make the financial leap from a unit to owning a house much harder.
Buyers have been lured back into the market by low interest rates, government tax cuts and other incentives and the easing of coronavirus restrictions, as well as a change in housing preferences post-lockdown. Consumer confidence has made a remarkable rebound, boosted by the federal budget, success in containing the coronavirus and the prospect of further interest rate cuts. Strong buyer demand has absorbed rapidly rising new supply. With fewer investors and foreign interest, first-home buyers are taking advantage of the reduced competition, government incentives and low mortgage rates. With high vacancy rates, weak gross rental yields and fewer opportunities for capital gains, it may be some time before investors return.
Sydney’s property market still faces risks as home loan holidays and government support packages eventually come to an end. While there is currently no evidence of an increase in distressed selling, the risks increase once financial support is removed. Demand will also take a hit as overseas migration collapses. The proposed relaxing of lending standards early next year and the imminent prospect of an interest rate cut will encourage people to borrow, however. With less scrutiny placed on borrowers it will become easier to take out a mortgage, making access to credit simpler and quicker. This is likely to boost demand for housing and, in turn, support home values.
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