At the end of 2019, Sydney enjoyed the strongest housing market in the country, but the world has changed significantly since then. Yet despite the panic of the Covid-19 pandemic, property prices have remained relatively stable. And while the big banks are predicting a decrease in housing prices in the near future, there are some positive signs which suggest that not all hope is lost.
The reality of the economic fallout will depend on a wide variety of factors. The faster we can contain the virus, the sooner it will mitigate any serious shifts in the market. But before we make predictions, we have to look at how the market has reacted so far.
Supply is still relatively low in Sydney, creating value stability throughout many neighborhoods. So while we are likely to see some drop in prices, it may not be as drastic as predicted. In addition, any drop in property prices will be a result of the lockdown rather than the value of the property. This is particularly important for owners and potential buyers to remember, especially if there’s a yo-yo effect in the next few months.
When the property market is at a true nadir, owners are ready to part with their property for cents on the dollar. But we aren’t seeing anything like this in Sydney. Even though the number of sales is low, the asking prices have not seen a significant downward trend.
In fact, you can get a sense of just how residential Australia has recovered from historical negative economic factors based on this graph:
As we can see, annual growth rates of home values generally remain positive, even after seismic economic events such as financial crises or recessions.
So while it’s clear that there are big shocks that have repercussions, the elasticity of Sydney has proven itself over time. There’s every reason to believe that coronavirus can be a blip that we can recover from in shorter order than expected.
The activity from Sydney’s auctions can tell us a lot about a housing market and where it’s likely to go in the future. As one of the most common ways to purchase property, auction behaviours demonstrate both the demand in the area and the number of sellers who are ready to let go of their investment.
In Sydney, confidence is bouncing back at auctions as COVID-19 restrictions ease. There is greater optimism by agents, with 20 people now allowed to take part in public auctions from June 1, which is helping to boost the market.
First home buyers may not be pleased to hear that the market hasn’t hit rock-bottom prices, but the stability of the housing market will be better for buyers and sellers alike in the long run.
The possibility of a bubble has always made people nervous, especially when home prices have climbed as high as they have in Sydney. Buyers worry that they’ll buy at the height, sellers worry that they’ll have to move right after the burst, and economists worry about the overall effect it will have on the market.
But home price growth can also be a sign that the economy is in a good place. Buyers have the capital behind them, sellers have the leisure of being picky, and economists can get a little peace of mind as everything chugs along.
We’ve clearly seen that the housing market is starting to cool off and that the rate of capital gain is also seeing a downward pull. However, this is not necessarily a sign that buyers and sellers will soon reach a point of desperation.
The bigger picture of home prices might show a faster rebound based on everything from local demand to global events. With certain neighborhoods still seeing plenty of action, the averages aren’t necessarily going to raise concern anytime soon.
There has been a recent drop in how many new homes are being completed, which is to be expected during a time when we’re all meant to stay isolated from one another. But just because new homes are being delayed doesn’t take away from their existence — even if they’re only half-finished.
To boost Australia’s construction sector, the government is providing cash grants for home renovations as part of a new round of economic stimulus.
Through it all, the number of homes in new construction in Sydney is a sign that there remains a demand for that housing. With an increase in supply comes a small drop in prices, which is exactly what the city will want for first-time home buyers.
The easier it is to enter the market, the faster we’ll close an intergenerational gap, where only one age group holds most of the properties. Again, the larger point is that the market doesn’t flip from one extreme to another, leaving all players with very little time to catch their breath.
Stability in the Sydney property market is not an optimistic pipe dream. The predictions of calmer waters rather than violent storms are based on historical trends as well as current realities.
At Shore Financial, we’re here to help you understand more about how you can go about securing a property that will pay off for you both now and in the future. No matter what time you enter the market, we can help you make the most of the circumstances. Contact us today to start working out the best strategy for your assets.