Sydney Median House Price Falls Below $1 Million

Well, it has finally happened, Sydney house prices have come off the boil and have begun to cool.

With the announcement by the Domain Group, that Sydney’s median house price has fallen below $1 million after recording a second consecutive quarterly drop for the first time in five years, new data shows.

Over the March quarter, the harbour city’s median house price dropped 1.5 per cent to $995,804, with apartments slipping 0.7 per cent to $656,166, according to Domain Group’s March House Price Report released on Thursday.

This is a strong indicator that the Australian property boom has peaked and those who have recently purchased a property had probably wished they had waited just a little longer before committing to the deal. In fact the real problem with a falling market like this is not so much the stable home buyer but the speculator who had hoped the binge was going to go on for a bit longer.

With added pressure from lending institutions further falls are likely. Some banks are now imposing a 70% LVR, which is forcing the hands of the willing bidders of just a month or two back to remain in their pockets. If banks are forced to tighten their policies and pull in over extended borrowers, we could be seeing a dramatic decline in housing prices in over heated markets like Sydney and Melbourne.

Some home owners who have recently sold are hoping that the prices will continue in the downward trend, as they put their funds on ice and wait for the market to bottom out. Expecting to receive a windfall bargain, could be quite realistic as those in a position who are forced to sell, when there are few buyers around, are really at the mercy of the buyer.

Andrew Wilson of the Domain Group believes we are headed for a sustained period of negative growth in housing prices in Sydney but the fall should not be dramatic, due to the decamping of investors.

Melbourne Property Prices Forecast to Rise by Up to 13% in 2016

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Last Modified: 01/1102/16

First-time home buyers looking to purchase property in Melbourne can finally sigh in relief because time, for the first time ever, is on their side. For years, people looking to purchase property have had to run around chasing the elusive dream of owning a home because they were outgunned by the cashed-up investors who drove property prices high.

In 2016, it is predicted that while the prices of property could rise by as much as 13%, the fact that several investment banks foresee the market peaking means that lower prices are likely. This is the best news for first-time homeowners but not-so-good news for investors because it means there will be less investor activity.

The unexpected increase in of interest rates by some of Australia’s major banks in October came just as analysts predicted that peaking of Melbourne’s property Property insurancemarket in early March of 2016 according to American economist Harry Dent Jr. Melbourne’s property price growth is expected to eclipse Sydney’s in March 2016 or thereabouts. Brisbane properties on the other hand are undervalued and set to rise, with the possibility of even better returns.

Australia’s two largest property markets are expected to see a ranking change against a backdrop of dropping price growth witnessed all over the country. However, while Melbourne’s property market will overshadow Sydney’s, according to SQM Research, the values will grow at the slowest rate recorded since 2012.

In its report “2016 Housing Boom and Bust Report”, SQM Research says that Melbourne’s properties will grow at the rate of between 8% and 13% compared to Sydney’s 4% to 9%. The good news, however, is that there will only be a slowdown in the property investment market, partly contributed by October’s hike in interest rates, not a complete market crash like that witnessed in the US in 2008.

Good news for investors

For property investors waiting for the market to peak, there may be good news after all as dwelling prices will rise by as much as 13%. SQM’s Louis Christopher warns doomsayers waiting for the Sydney market to crash not to bet on it because even the worst estimates give the city’s dwellings market at least a 3% growth rate through 2016. The bottom line is that any growth is better than a decline, and neither the Melbourne nor the Sydney markets will decline.

On average, national property prices in Australia rose by an average 9.8% over the past year. In the year to June, the harbour city grew by an astounding 18.9%, a figure that greatly uplifted the national average for the year. Christopher says that the rising Melbourne prices will pick up later in the year, although investors shouldn’t expect it to grow throughout the year. He says that SQM forecasts the Australian national residential housing market will record a slowed growth from around March, largely as an impact of Sydney’s declining market and of course, the banks’ increase of interest rates. The market, however, will not record a drop in prices for the year 2016.

There are already warning signs that Sydney has passed the property market drop baton to Melbourne. In September, right before banks increased their interest rates, prices in Melbourne rose by about 2.4%, a sharp contrast to the prices in the Sydney market which recorded no growth in the same month.

The Aussie economy is slowing

If predictions by SQM are correct, then the prices growth recorded in Melbourne in September will take over completely in 2016. The estimated figure of 13% raises serious concerns about the city’s off-plan property market at a time when Sydney sweats to find answers to questions regarding its potential housing bubble this year. If the report by SQM is anything to go by, then the 2016 house prices will not be as good as 2015 was.

It is now a fact that the Australian economy is slowing. With the banking regulations that target investors, and more recently owner occupiers, in full swing, there is a lot of pressure on housing demand. The growth in population, a key factor to housing and property demand, is slowing too, contributing to the demand’s pressure that will be felt by property investors the most.

This, however, does not necessarily indicate that a bubble burst is in the horizon. Christopher says that the weakening dollar, expected drop in banks’ interest rates, and Melbourne’s growth will keep the market growth steady and afloat. It is important to note that all these will depend on other variables remaining favourable to the property market.

The Three scenarios affecting house prices in 2016

After crunching their numbers, SQM have determined that the three conditions will determine the property market growth and housing prices in Melbourne in 2016 are: interest rates, the dollar, and the economy. The several ranges of forecasts they have come up show the possible outcomes and position of the market at throughout and at the end of 2016.

reserve bank of australiaScenario 1: Assuming that by March 2016, the RBA will have cut interest rates by 0.25%. The economy will be stable, but the dollar may fall to US$0.60. In this scenario, SQM forecasts that the Sydney dwelling prices will rise by 4% to 9%, a satisfactory figure for a market that did not record any growth in September.

When it comes to Melbourne, SQM forecasts a growth of between 8% and 13% under the scenario.

Scenario 2: This scenario is almost like the first, except that it is worse. Assuming that the RBA cut interest rates by 0.5% before June 2016 to account for a struggling economy, the dollar will rest at US$0.55. In this case, SQM predicts Melbourne dwelling prices to boom by 10% to 15%. The 0.5% cut of interest rates would leave the bank rates at 1.5%, and this would boost home loan demand. Under this scenario, the Sydney market wouldn’t change much with a 5% to 9% forecast.

Scenario 3: The third scenario may be termed as “overly optimistic” and has the least chances of panning out. It assumes that there will be no rate cuts, the Aussie dollar to stabilise at US$0.80, and a turnaround of the economy. In such a case, there would be consistency in the growth of the housing market and the prices would boom at 4% to 7% for Melbourne and 3% and 7% for Sydney.

There is one denominator across all these three scenarios: The Melbourne property market. As signs show, the Sydney market is stalling already, and Melbourne is positioning itself as the driver of national house and property price growth.


Is The Australian Property Market In A Bubble?

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With some Australian real estate property markets experiencing 15% and more over the past year, in these post GFC economic times, the question has to be asked, “Are we in a bubble” and if so, “When will the bubble burst?” Before we dive into the answers, it is best we get a definition of exactly what determines a real estate market bubble.

What Defines A Real Estate Market Bubble?

Most commentators would define a market bubble, as something identified only after it does the proverbial bursting. Many would argue that just because a market, in this case the Melbourne and Sydney real estate markets, have experienced above average growth over the past two years, and that these prices represent clearly inflated values, that this in itself is not sufficient to define a bubble.

I know you are probably thinking that, that sort of growth can’t possibly continue indefinitely, and you would be correct. There will reach a point when the bubble will burst, the market (crash) correct itself and prices will be more realistic to their true values. Then again, some would argue that the “bubble” will not burst, that the growth curve will flatten or recede but this will not produce any dramatic drop in the actual values of properties.

Why Are Sydney And Melbourne Real Estate Markets So High?

It comes down to a question of supply and demand. When demand exceeds supply, you have market pressure forcing prices higher. In both Sydney and Melbourne, there are limitations on property availability in several suburbs that have profiles of high desirability. Properties situated close to schools, hospitals, shops, parks, the CBD, transport, cinemas and entertainment areas traditionally attract high demand for the obvious reasons.

Now if you add in the capital gains from such market growth, then you have the added pressure from investors fueling the fire even further. It is a bit like bee’s being attracted to the honey pot. Well, actually there is a oft misquoted phrase, because bee’s make honey doesn’t mean they are attracted to it. Ants on the other hand…

So these ants that are attracted to the honey pot, investors, actually heat up the market according to their numbers. This creates a feeding frenzy and this in turn makes the impression of the bubble.

Why Aren’t Other Areas Of The Market Experiencing Such Growth?

Other parts of Australian, are not experiencing similar growth to be either Sydney or Melbourne, simply because they are not experiencing such growth. I know that sounds like a circular argument but it is true. Everybody wants to go where the action is and this is what pushes markets even higher. Forget the fact that Joe average can’t afford to play the game if he is just starting out as a first home buyer. He doesn’t figure in this rapid growth equation. I know this creates a socioeconomic problem of affordability versus occupancy, as values rise, rates of rental return need to keep step, otherwise the market will not be sustainable.

Simply put if rents are too high, then no one is going to be filling the investors properties and without that, the property values will fall.

Areas outside of the property hotspots, have remained at steady rates of growth that is more sustainable, simply because the investors are fueling the fires elsewhere. Speaking of investors where are they coming from?

Foreign Investors Fueling The Sydney And Melbourne Real Estate Bubble

In the Sydney Morning Herald today, Mark Mulligan explains that the recent trouble with the Chinese economy has brought about reforms that will increase the pressure on Australian Assets, including property, as China frees up the flow of money in and out of their economy. It is related to the equity, bond and currency markets, that will lead to inflated prices of assets across the world.

Foreign ownership of land is something that the authorities have lamely attempted to curb, all the while rubbing their collective hands together as their coffers are bursting at the seams. In NSW for instance, John Bairds government has reaped an enormous budget surplus out of the property boom, by way of collecting stamp duties. In just the first two months of this year, the Baird government netted a massive $1 billion in stamp duty as figures released from the NSW Office of State Revenue reveal.

What Might Trigger The Bubble To Burst?

If a real estate bubble does exist in these two markets, what might be the trigger of it bursting? Good question and to find an answer we can look at the sub-prime real estate bubble bursting in the US which lead to the worldwide economic meltdown we know as the GFC. In this situation we had a whole range of low interest loans coming out of the honeymoon phase, with an over represented proportion of home owners unable to pay the higher repayments suddenly either selling or going into foreclosure. This sent a chill through the market and the prices began to tumble.

It comes down to supply and demand, coupled with market reaction.

If there exists a very good reason to exit the market as a cashed up investor pulling out their gains, with the belief that the market has topped out is brought about by the sustainability factor capping prices, then this could accelerate to the point of everyone wanting to get out at the same time before the market falls too far.

Once this happens  and the speculative investors are out and only the long term buy and hold investors remain, those who bought at over inflated prices, who now face lower returns and a dropping value also decide to get out and so the bubble bursts in a spectacular fashion.

What Are The Experts Saying?

According to this article published on the SMH the 25 leading economic forecasters polled by the Fairfax paper, most believe that the Sydney market will experience growth of 10.4 per cent and Melbourne to grow by 6.4 per cent this year. If this is true, then this puts pressure on the federal reserve to act in a way to stimulate an otherwise lagging economy.

Well maybe they are right and there is no bubble and it won’t burst anytime soon. And then again, what would happen if another major worldwide economic shift came into play? The destabilisation of the EU with Greece’s recent troubles might not be the trigger but what is happening in China as demand for the worlds commodities comes off the boil could well be something to watch, according to Harry Dent.


Melbourne and Sydney Hot Property Markets 2016

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Last Modified: 01/02/16

Investment Property For The Cost Of A Cup Of Coffee?

How expensive is it to own your an investment property? According to John Faulkner from Home Port Property, it can be as little as just $4 a week. Round about the cost of a cup of coffee. To see how John explains that the average person can afford to do this, by looking at a real life example of an off the plan Brisbane development, just visit this page to view the free webinar replay and find out exactly how you can do this too. Now back to Melbourne vs Sydney…

The property prices in Melbourne are either impossibly high or dwindling and the answer depends on who you ask. Some suburbs are booming while others show stagnation from being oversupplied. High end suburbs like Kew and Brighton are booming while in the inner circle, there is a glut that is causing price stagnation. The good thing though is that the Victorian capital contains some good prospects which, unlike Sydney, have not reached the unaffordable level.

So long as you are ready to venture outside the typical inner circles of Melbourne, there are some well-priced but attractive prospects in Melbourne. Most of these suburbs have excellent transport connections as well as growing job prospects.


So what are the investment hotspots in Melbourne?

melbourne_hotspot_investment_2015Opportunities on the Peninsula

One affordable option found in the Bayside region is Frankston. This is a coastal suburb that has parks and gardens as well as several young families. Also, it has rail connections to Melbourne’s CBD and a good road connection in addition to Peninsula Link.
Property rates here are growing by roughly 7% annually, and the median house price stands at about $330,000 according to the figures coming from RP Data. The same figures show the median unit price to be $260,000.

Experts see Frankston as being on the verge of a big socio-economic transformation. It is a hub that is regionally significant between the Mornington Peninsula and Southern Metro area of Melbourne. The area has been estimated to have a population of over 470,000 by 2026. Employment opportunities in this area are also set to be improved by the local council.

The inviting northwest

Another area experiencing an unusual wave of popularity is Sunbury, located some 40 km northwest of the CBD. Many buyers see the place as offering cheaper housing despite being in an area that is well-linked to the city.
Observers see this area as one of the Melbourne’s principal growth corridors given that it offers cheaper housing that is sure to drive investors looking for sustainable growth and good yields.

501Beware the CBD

Many investors usually find it impossible to resist the CBD because this is where most of the new buildings are, the best jobs are found and also the most vibrant dining and entertainment is to be found.

But the flip-side is that there is an oversupply of houses given that too many units are being developed in this area. This has really slowed price growth, which ultimately hurts rental yields. This should discourage many prospective investors.

According to Cameron Kusher, a senior research analyst at RP Data, the RBA was concerned by this and that is why they warned investors of risks involved with buying inner-city as well as outer fringe Melbourne markets earlier this year.
Kusher further notes that Melbourne has the smallest growth rental yields at 4.4% for units and 3.6% for houses.

What are the top 5 property investment hot spots of Sydney?

There are many factors that come into play for a suburb to be made a growth area. These include improved roads, new infrastructure, and access to local amenities and public transport. Investors also consider why a community would want to live in a specific area, as this is what makes a suburb popular with renters. Based on these factors, let’s look at the hottest property markets in Sydney.

• Lakemba

What makes Lakemba a terrific property investment destination is because of the cultural connection that people usually have with Lakemba Mosque. This means that the area is likely to always attract renters as well as offer a decent rental return.

• Surry Hills

This still remains a solid buying area which will forever be rentable. You could also get a great terrace at a bargain price.sydney_hotspot_investment_2015

• Botany

This is absolutely a cracker area. Although many people are of the view that this area is falls in the flight path, the truth is that it’s not. In terms of price, the area is hugely undervalued given that it also has Eastern Distributor’s which makes it a lot easy accessing the area. There are lots of opportunities that you can renovate in this place.

• Woolloomooloo

Have some of the best priced terraces with some still requiring renovations. The place is also quite popular with the renters.

• Pyrmont

available soon sydney investment propertiesThis area has terraces that are hugely undervalued since they are lumped in one category as units which happen to be in oversupply. What makes this area terrific is the cultural lifestyles that it offers and also its closeness with the Harbour which has made it one of the best Sydney hotspots.

Affordability or growth?

Although Melbourne might appear affordable in some areas, there has not been a lot of investor movement and this is with a reason.
Kusher says that both Sydney and Perth had a 5-year stretch which was characterized by flat-lining and this allowed for affordability in the two cities to improve. It is for this reason that in Sydney, for instance, low rates of interest have been catalytic lately for property investment.

Conversely, Melbourne did not have a long period for market correction, and although it has lots of affordable offerings, the current values stand at 4.4% lower as compared to their October 2010 peak.

The reason the Melbourne property market does not respond with similar level of dynamism as the Sydney and Perth markets is basically because of affordability, according to Kusher.

investment property melbourneMelbourne market however is expected to continue to realize moderately rising values with mortgage rates being so low. However, there are risks of further value falls if mortgage rates start to rise and also if the unemployment rises as has been forecast.

In meantime though, a handful of Melbourne suburbs have enjoyed a dramatic growth, and these include East Melbourne, Eaglemont, Elwood, Malvern East and Warrandyte. In these suburbs, house values shot up by over 20% in the year ending July.

In suburbs like Eaglemont, values are obviously at the higher end but owing to the spaciousness as well as the beauty in majority of these homes, there seems to be an increasing appetite of living there.
As for units, Albion, Murrumbeena, and South Kingsville increased in value by over 23% in the run up to July. The suburbs are also well connected to public transport and are close to Melbourne City Centre.

Australian Investment Property Updates

The property market enjoyed a bumper season in 2013. There was a significant rise in house price in larger cities of Australia. The Sydney market was bolstered to new heights by investors while clearance rates in Sydney and Melbourne returned to 3-year highs.

The median prices of houses in Sydney went up by 15.1% and in Melbourne it was up by 8.6%, according to figures from Australian Property Monitors. As house prices become only steeper and analysts saying first home buyers locked out by skyrocketing values, what are the trends in 2014? Read our investment property update to know where the property market in Australia currently stands.

House price growth in Sydney and Melbourne

investment properties sydneyAccording to Figures released by RP Data on 29th September 2014, City housing markets reported their best ever winter since the global financial crisis. RP Data’s Home Value Index reports that capital city dwelling prices rose by 4.2% over three months ending August compared to the same period on 2007.

Once again, the surge in house prices were driven by Melbourne and Sydney markets, which registered increases of 6.4% and 5% respectively, according to RP Data.

Tim Lawless, research director of RP Data, says that the surging property values in the two biggest Australian cities have become the feature of property landscape in the last 5 years.

He says that Sydney dwelling values have increased by 27.2% and Melbourne registering a rise of 19.5% in the latest growth cycle.
Melbourne and Sydney were also the best performing cities during 2009-2010 growth cycles, according to Mr. Lawless.

What are the Suburbs to watch?

In 2013 and before, Sydney’s prestige market had been lagging behind but it begin rising in 2014.
Sydney’s eastern suburbs and northern shore have particularly done well. These areas saw modest growth levels in 2013 but there is much room for growth. If the sharemarket shows strong growth, the prestige market is expected to keep bubbling along.

In Melbourne, the eastern suburbs, which are the expensive areas, also recorded the best performance in 2013.
Although the eastern suburbs have been the best performers of 2013, questions still linger as to whether they have reached affordability levels.

header_bpinvest2.jpgAlthough are still some upsides like the premium markets of Sydney, it is expected that there will generally be price growth moderation. Reducing numbers of first time homebuyers will also impact on the outer eastern suburbs.

Every capital city has its inner ring areas which offer strong investment opportunities. Sydney has Bellevue Hill, Melbourne has Malvern, Perth has City Beach and Bulimba in Brisbane.

Melbourne has the most number of top 5 hottest suburbs with Elwood, Richmond, Rhodes and St. Kilda all featuring. At the same time, units in North Bondi (Sydney), Subiaco (Perth) and West End (Brisbane) have been predicted to deliver good inner ring growth performances in their respective cities.

Melbourne, particularly, is defying past forecasts. It appears as if it has been oversupplied with property, especially units. However, demand is presently being driven by three main factors. These are international buyers supporting new unit sale, developers managing their properties well and higher public confidence which is in turn being driven by things like good clearance rates at auctions.

If you want to buy property in the coming 12 months, it is important that you be aware of growth patterns. It is very important to carry out proper research on the market and back up your decision with insight and data.

Will house prices to continue to rise?

The June quarter report shows that strong market conditions continue to prevail in many capitals. Price houses in Australia continued their meteoric rise in the June quarter report with many capitals reporting similar or higher growth levels compared to the March Quarter results.

The national median prices of houses increased by 1.9% compared to the rise of 1.7% that was observed in the March quarter. There was also a sturdy rise in the median unit price which grew by 2.7% compared to the 2.0% growth of the March quarter.

Sydney is the standout performer

Sydney housing market still remains the standout performer after posting another god result in the June quarter. It recorded an increase of 3% in its median house price to stand at $807,880 and in the process smash the previous$800,000 barrier. It increased by 14% or $114,000 in the 2014 financial year. Sydney recorded the best quarterly and annual results of all capitals.

The growth of house prices in Sydney over June quarter outstripped the March quarter performance of 2.6% although it remained below the 5.6% that was recorded in the December quarter in 2013. Also, Sydney unit prices recorded strong growth of 3.5% over the June quarter to 12.2 per cent.

Melbourne housing market also reported an impressive growth over June as median house prices rose by 1.8%. Again, this was higher than the previous March quarter results. In the period ending June, Melbourne house prices went up by 10.3% while unit prices increased by 2.7% to stand at 8.8% over the year.

What are the fundamentals of housing price markets?

Experts agree that housing market fundamentals are still very strong. Not only have house prices done well but activities have also picked up. It is only renovations to old homes that remain weak. This is attributed to strong population growth which is in turn driven by immigration and low mortgage rates. These factors are likely to continue pushing up the expanding market.
Economists had projected that new building approvals would ease by 0.3% in December following a fall of 1.5 percent in November and 1.8% drop in October. These falls partially reversed the acute September jump.

Many people had thought that the Australian property bubble would burst but if these figures are anything to go buy, then the market is still pretty very strong. The house prices in major Australian capitals like Sydney, Melbourne, Brisbane and Perth continue to rise encouragingly. Low mortgage lending rates have also driven the market. However, the single biggest losers are the first time buyers who are literally being priced out of homes. Experts however see the Australian property market holding its own for some time to come. The property market in Australia has been in buoyant mood in the last 5 years recording its best performance in decade. As expected, Sydney and Melbourne remain the biggest drivers of Australian property growth.