Spring property buying season hits Sydney

The Sydney property market is in an interesting phase. The downturn of the previous few years appears to be over. Green shoots are sprouting in this evolving market and buyers and sellers have reason to be cautiously optimistic.

Demand picks up

Although interest rates and unemployment are at record lows, property prices are undeniably down. This is partly due to the limited availability of credit – lenders are still cautious in their assessments of home loan eligibility. This has had the knock-on effect of dampening demand. In Sydney, the decreased demand can only be temporary. Population growth is as strong as ever in Australia’s largest city, and the pressure for housing will only rise.

We’ve had the highest level of clients seeking a home loan pre-approval. This is a strong leading indicator for the spring buying season.
— Zac Peteh, Director & Finance Broker - Mint Equity
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Sydney median house price at a low

According to QBE Australian Housing Outlook 2019-2022 report, the median house price in Sydney is at its lowest level since 2014. At June quarter 2019, the median house price was below the 1 million mark at $983,000. Compared with the same quarter in 2018 and 2017, this is a 13% and 18% decline, respectively. Sydney markets peaked at June quarter 2017 when median house prices were at $1,194,900. A surge in new dwelling completions (houses and units) was certainly one factor behind the fall in median house prices. Vacancy rates have increased thanks to the rise in supply, resulting in rent and property prices being under less pressure to escalate.

Sydney median house price set to rebound

The good news is that by 2022, the median house price should pick up again, with forecasters predicting a 5.8% rise within 3 years. For anyone thinking of taking out a home loan, now is a good time to strike. As Sydney mortgage brokers, we’ve had the highest level of clients seeking a home loan pre-approval. This is a strong leading indicator for the spring buying season. Those buyers with pre-approved finance will be the winners at open houses and auctions.

Recent changes to lending

With higher interest rates and more stringent bank lending policies in place, investors have been most impacted by the recent changes to lending. The value of loans to investors dropped by 41% from 2016/17 to 2018/19.

Owner-occupiers, on the other hand, have more in their favour. Although home loans to this group decreased by 15% in NSW last year, first home buyers' loans rose by an impressive 74% in 2017/18. The rollout of stamp duty concessions clearly had a favourable impact on these buyers, even though activity slid back by 2% in 2018/19.

With the ARPA softening a range of restrictions on lending practices, more owner-occupier buyers are being lured back into the residential market. Sydney house prices have probably reached the bottom, and all forecasts point to the median house price rising by 1.2% this year to reach $995,000.

A bright outlook

The Sydney property market recovery appears to be on its way. The supply of new dwellings will drop sharply after 2020. Population numbers will continue to rise and vacancy rates are set to shrink between 2020 and 2022. Rents and property prices are likely to climb as a result.

By June 2022, the median house price in Sydney is expected to grow cumulatively by 6%, which will place the median at $1,040,000. This will be below the peak of June 2017, but it is progress nonetheless. Conditions are right for a spring property boom to hit Sydney.