Sydney property market remains a juggernaut

Sydney property market remains a juggernaut

Will it, or won’t it? The question that has so many struggling for the last seven years and now itching to witness the demise of the strongest property run seen since the late 1980’s. Personally I can’t see this happening in Sydney anytime soon as the foundations are still rock solid.

Interestingly it was reported this week by CoreLogic that dwelling prices fell slightly during April which made me smile because April was always going to be a flat vendor month due to school holidays, Easter and ANZAC Day. As we have become accustomed to with property reporting, never let the facts get in the way of a good story.

I was reading an investment report this week where I was interested to read that “The big four banks make up around 25% of the ASX 200 Index. When they do well, ‘the market’ does well. So, the big four are an excellent barometer for where we are headed and coincidentally they are still reaping billions and billions in profits.

Although the Australian Prudential Regulation Authority (APRA) is keeping a watchful eye on them, having recently caught them reclassifying property investor loans as owner occupier loans without advising the public. What this tells us is nothing new as the property investment market is looking very weak in the high-density sector because it is massively overvalued.

What I do find fascinating is there is no distinction between the property investment market and the traditional home owner market which by contrast are distinctively different. Some argue there should be no separation as they both carry excessive household debt which is true although I believe there is a significant difference with one being based on a yield and the other is occupied by the family.

If we were starting to see changes in the markets then we would be witnessing two significant warning signs – firstly, weekly clearance rates would be tumbling which they are not and secondly, agents would be revising valuations down which is something we are also not seeing. Mosman has just 41 houses available this week, the same week in 2016 there were 57 houses, in 2015 there were 92 houses and in 2014 there were 89 houses.

Historically we only see significant property value corrections simply due to oversupply, although what we are witnessing in the traditional housing market is a chronic under-supply. Now this has been happening for years – Mosman house volumes are down by 55 per cent and each year we continue to see more declines.

Of course, this is completely different with the investor markets where entire developments have been purchased by investors where very shortly they will be actively trying to secure tenants. The problem is that the glossy rental returns first quoted in the glossy off-the-plan brochures will be much less, so the major concern is for investor panic to set in which has the potential to see a free-fall in prices.
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This is precisely why APRA is scrutinising the lenders so closely and it should come as no surprise to see them caught red-handed re-birthing home loans. Lenders are only too aware that this market will indeed be very problematic for them and that then affects their respective share prices and bonuses.

All attention now turns to next week’s federal budget where the housing affordability debate has been front and centre. Although I don’t really expect any earth-shattering announcements simply because the housing market is the strongest economic driver in the economy at present. Maybe some minor critiquing such as addressing vacant properties with the introduction of a land banking tax. Nothing will happen to negative gearing and tax concessions because the Turnbull government is already on record that this will not be meddled with. Possibly off-the-plan ratios may be reduced from 100 per cent as they should be to greater assist the domestic market. A tightening of the loopholes where foreign students can buy into the market with a clamping down on the students who have subsequently graduated yet still own the subject property, as this has never been policed.

An update on how the Australian Taxation Office is progressing with illegal acquisitions as this has gone very quiet over the last six months with next to no communication on progressions.

Regardless of what happens the domestic property market will continue to remain strong so no need to be concerned about the family home market because if there were concerns we would have seen stock levels increase significantly.

    MOSMAN – 2088

    Number of houses on the market this time last year – 57

    Number of houses on the market last week – 36

    Number of houses on the market this week –41

    Number of apartments on the market this time last year – 50

    Number of apartments on the market last week – 43

    Number of apartments on the market this week – 42

    CREMORNE

    Number of houses on the market this time last year – 7

    Number of houses on the market last week – 9

    Number of houses on the market this week – 9

    Number of apartments on the market this time last year – 14

    Number of apartments on the market last week – 15

    Number of apartments on the market this week – 16

    NEUTRAL BAY – 2089

    Number of houses on the market this time last year – 8

    Number of houses on the market last week – 4

    Number of houses on the market this week – 4

    Number of apartments on the market this time last year – 31

    Number of apartments on the market last week – 16

    Number of apartments on the market this week – 19

    Source – Pricefinder

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