June 2017 - What does a Sydney slowdown really look like?
By Rich Harvey, Managing Director propertybuyer
Has the Sydney property market put itself into reverse, or is what we're seeing more of a light tap on the brakes? Which way is it going? Also in June's update, we show off the iconic Bondi as our feature suburb and invite you to come along to our Sutherland Shire Seminar next Tuesday.
This June update includes:
- What does a Sydney slowdown really look like?
1. What does a Sydney slowdown really look like?
When you take your foot off the accelerator, do you start going backwards? Of course not. Momentum keeps you moving forward, albeit at a slower pace. Your speed has changed, but direction has not.
It's the same for the Sydney property market. Even with CoreLogic showing a dip in values over May, forward momentum and the classic drivers of the property market keep it going in the same direction long-term. In the short term, however, that slowdown means a few key things for Sydney investors.
1) The pendulum will swing towards buyers
It's been a sellers' market for a long time here in Sydney. While that hasn't completely vanished yet, the slowdown in prices means we are on the cusp of a shift to a buyers' market. As we approach the lower part of the property cycle, that will mean less competition for house hunters.
For example, auctions that would have 10-12 committed bidders a year ago will see these numbers dwindle to just three or four. Fewer rivals will often mean better opportunities to buy at a comfortable price. A market breather is the perfect time to beat the competition.
2) Now is the time to strike
If you've been sitting on your hands waiting for a moment to buy property in Sydney, now's probably as good a time as any to strike. Fewer buyers and a breather in the market gives you a prime opportunity to get a good deal - and you have to consider the long-term benefits.
Even though Sydney values dropped in May, the growth over a period of years is staggering. CoreLogic noted that in the last 20 years, the capital city median values have gone up by 346.4 per cent. In the last year, Sydney values are up 11 per cent.
But during the entirety of the last market downturn, there was only a 5.2 per cent decline in values for the NSW capital. Downturns don't last long either - a matter of months. In the two periods in which values have fallen, capital city dwelling values fell by -6.1% between March and December 2008 and they fell by -7.4% between October 2010 and May 2012. Look at the graphs below created by CoreLogic, showing how much larger out market rises are than the falls.
At an individual capital city level housing markets have cycled quite differently however, the majority of capital cities recorded a decline in dwelling values in both 2008 and from late 2010/early 2011. The 2008 decline occurred as the financial crisis hit with values falling however, stimulus measures in the form of aggressive interest rate cuts along with cash handouts and boosts to first home buyer’s grants proved enough to spur demand and turnaround the decline in values.
This means that any break in the market is a good time to strike - it might not last very long. Based on what we've seen so far, a slowdown looks more like a gentle tap on the brakes than putting a car into reverse. The song remains the same, and investors and homebuyers need to join in.
If you’ve been sitting on the sidelines for sometime waiting for a momentum shift in the market, now is a great time as we head into winter to make your move. To get an added advantage, speak to one of my buyers agents to make your property plans a reality. Call us today on 1300 655 615 or contact us via this enquiry link.