Has the Sydney property market experienced a bubble?

This is a common question that many buyers and sellers in Sydney are asking these days. The answer to this question is entirely dependent on what media you listen to or what papers you read. To try and help you understand where the Sydney property market currently stands, we have put together this article.

Trends Of A Bubble

The first thing you need to look at is what the trend of a bubble actually looks like. Nobody can predict the future, so all you can really do is compare the current trend to property bubbles from history. In addition to that, you have to look at the underlying economic factors.

A growth trend can go on for many years before it starts to correct. And when economic indicators around job growth, population expansion and increasing wages support the trajectory, then references to a bubble can be significantly exaggerated.

When people speak of an asset bubbles this is generally done to paint a negative picture. Bubbles are usually associated with major market crashes and serious economic problems. So, when you hear talk about property bubbles you have to ask what the motivation behind those statements is.

Let’s take a look at some common indicators of housing bubbles.

Excessive Lending

When you look at some characteristics of lending practices that were common in recent bubbles like the USA, Ireland and Greece, then there is a common element. In all those countries lending practices were relaxed excessively. Anybody with even the smallest income was not only able to borrow huge amounts for their own home.

But they were also offered multiple mortgages for investment properties. And all these loans were made with very small to no down payments. Such lending practices have not been common in Australia. If anything, many people have been struggling to get mortgages in the first place.

The Impact Of Winter

Different times of year have definitely got an impact on supply and demand of real estate assets. During the winter months, most of the hottest real estate markets cool down. This is because both buyers and sellers tend to avoid the darker and colder months of the year.

As well as that, you have to consider that investors tend to operate on specific buying cycles that coincide with the financial year. Coming towards the end of June, markets generally see increased activity from investors to get their transactions completed before their books have to be completed.

That leaves quite a few winter months during which activity slows considerably and where buying opportunities improve. If you need help to figure out the best times in winter to buy then working with a buyer’s agent like us will work very much in your favour.

Growth Rates Of The Last 5 Years

Sydney has certainly seen some of the highest real estate price increases in Australia. In the last 5 years, this has resulted in a 70% increase which is quite a bit higher than the Australian average of 40%. But this has to factor in how much more attractive Sydney is as a place to live, than almost anywhere in the world.

Tens of thousands of people have been moving to this vibrant city from all over the country and the world. The population has been growing by almost 2% per year. That has resulted in many new people who have set their roots and have had families.

Reasons Not To Believe The Bubble Hype

Many media outlets have jumped to conclusions about some of the fluctuating real estate prices in Sydney. Auctions have also not shown the same level of demand. But that should not lead to immediately concluding that a bubble is popping. There are several factors that still support a strong growth forecast.

The most popular suburbs have always been within a 10 km radius. And as soon as prices show any signs of dropping in these areas they will present great buying opportunities. If you need any help with figuring out the best areas for you to look at properties, then contact us today. As one of Sydney’s leading buyer’s agents we have the expertise and experience to focus your attention on the best opportunities.

Latest Federal Budget Measures

Government measures have been introduced in the latest budget to dampen property price growth. While the real effects will not be known for several months to a year, some of the restrictions put in place will certainly reduce demand. And the demand that is mainly being targeted is foreign investors who spend little to no time in their properties.

But more importantly, the budget has introduced measures that will make it a lot easier for people to save the money for a deposit. By being able to save in and access superannuation funds there could be a significant increase in demand in the coming years. More people will finally be able to take the first step onto the property ladder.

Population Growth

The City of Sydney Population Forecasts show the number of people living in Sydney will remain on a significant upward trajectory. And this trajectory also shows a significant increase in the younger population. These young adults will eventually need to find somewhere to live. And that will mean additional demand for both rented and owned property.

Economic Growth

Sydney is growing as an international hub for large corporations. Almost no month goes by without major new investments and expansions by very large international companies. A lot of this has to do with the fact that Sydney is the largest English speaking city with close proximity to Asia.

And when you also consider the amazing transport, health and education infrastructure then it is no surprise that the city remains to be such an attraction for workers and employers.

All these factors will continue to drive demand for property. Some of that will mean expansion of the outer suburbs. But most people are still attracted to the inner 10 km radius. Talk to us today to get professional insights into the best locations and buying opportunities.