First dip in Sydney property values in 17 months

PROPERTY, just like any other investment class, follows cycles where prices can rise, fall or plateau.

Sydney got a rare taste of a dip in September, according to CoreLogic, when it joined Darwin with values falling.

It was no great surprise, and not by much.

After getting 80 per cent per cent higher over an extended five year upswing, Sydney dwelling values slipped 0.1 per cent lower over the month to a $909,000 median, it’s first month-on-month decline in 17 months.

Of course, the headline figure is accompanied by increasing resale activity at lower prices.

The most recent CoreLogic pain and gain report noted 2.6 per cent of Sydney houses and 1.8 per cent of units had been resold recently at a price lower than their purchase price.

This is a very low volume of resales considering the proportion of loss making sales at the national level was 8.1 per cent for houses and 13.3 per cent for units.

Many Sydney council areas recorded no loss making sales over the March quarter, including Waverley, Ashfield, Burwood, Hunters Hill and Kogarah.

The council areas with the highest proportion of resales at a loss were Wollondilly (5.9 per cent), Hurstville (5.7 per cent) and Hawkesbury (4.8 per cent).

The ups and downs in pricing can be typically explained by supply and demand forces and exuberance.

The rising volume of new stock on the Sydney market, both auction and private treaty, is likely to place further pressure on the market during spring, as volumes are sitting some 16 per cent higher than last October.

The Sydney property market is more likely to experience an extended plateau rather than any doomsday crash scenario due to the relatively low unemployment rate and heightened population growth.

CoreLogic’s head of research Tim Lawless says prices in Sydney will probably trend lower into 2018, although continued strong demand for housing, along with the likelihood that interest rates will remain low, will put a floor under housing prices.

I’d suggest much depends on Sydney investors who appear to have momentarily called time out in part because they are now paying higher interest rates.

The investors’ response is an understandable reaction to policy initiatives by APRA, the financial regulator, for market cooling.

Residential investor activity has declined sharply in NSW — the latest data from the Australian Bureau of Statistics reported approved residential investor loans for buyers totalled $5.7 billion over July which was down 22 per cent on June.

Sales data indicates NSW investors were more likely to incur a loss on the resale of their property than owner occupiers. Over the March quarter, 1.9 per cent of investors resold at a loss compared to 1.8 per cent of owner occupiers.

Tracking price cycles can pay dividends for savvy buyers as there are times when property purchasing can result in a wonderful early gain.


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