13 May Sydney’s property bubble conundrum. Should you buy now or bank on a bust?
Sydney’s property bubble conundrum. Should you buy now or bank on a bust?
Sydney’s seemingly perpetual property bubble has been one of the hottest topics in the city for years. Now, with the market showing an apparent decline and bubble-inspired media hype reaching fever pitch, more people are becoming convinced that a crash is around the corner.
But hype and hopes aside, how likely is a significant drop in prices really? Does the current data point to a short-lived slip or the coming of a sudden slump?
This begs the question – should you buy Sydney property now or wait for a bust and the ensuing bargains from the fallout?
Since all markets have an element of volatility, it’s a question no one can answer with 100% certainty. The problem is, if you do decide to hold out, you might find yourself waiting for a while.
Debate around the current Australian housing bubble has been going on since at least 2001. Since then, Sydney’s median house price has gone up by an astonishing 220%. Despite this, data charting the progression of median prices over the last two decades shows us it hasn’t all been unstoppable growth year after year, as this graph posted by Tim Lawless, CoreLogic’s head of research demonstrates.
Prices stalled during the two years of the GFC and experienced a record slump of 8% amid the global economic turmoil of 2011. But as this chart plainly indicates, the overall trend is up, up, up.
So, it seems the fact that Sydney prices haven fallen around 3% since last year’s peak in July isn’t a sign of far steeper falls to come. The dips that occur every few years are a natural reaction to market forces, such as the tighter lending standards for investors introduced by the major banks last year.
Looking at the data over the past two decades, house price growth in Sydney has been remarkably consistent overall. Excepting the advent of a crippling recession or major financial meltdown (which would in any case, be a terrible time to buy!), there’s no reason to think that this trend won’t continue.
Other housing markets have crashed in recent years. What makes Sydney special?
This resilience is in part because Sydney’s property market is underpinned by strong economic growth and exponential increases in population. As one of the world’s most prosperous and liveable cities, Sydney’s population is expected to leap by more than 2 million in the next 20 years, meaning property will always be an enormously valued commodity. This is especially true in highly desirable areas like the Eastern suburbs and inner city, where competition for limited housing stock is likely to only intensify.
Most experts agree the crazy price spikes of the past decade were largely emotionally driven and unsustainable, and as a result, housing in some parts of Sydney has become overvalued. As home buyers, investors and lenders adjust their expectations and take on a more level-headed approach, a slight cooling off of prices results.
So, is Sydney property still a worthwhile investment?
Looking at all the evidence, we’d have to say yes, and sooner is better than later when it comes to making a purchase. Prices might still ease a little further, but early data shows that the rate of decline is already beginning to slow.
While interest rates continue to remain low for the foreseeable future and the economy remains buoyant, buying now rather than placing your bets on the unknown seems like the most logical option.
Smart homebuyers and investors buying the right types of property in the right areas should still feel confident that the purchases they make now will have a strong future ahead of them.
What’s most important is securing the right property at the right price – one that’s likely to weather any drop offs in specific sectors and reveal increasing value and potential well into the future. Drawing on years of experience, the buyer’s agents at Bespoke have achieved great success in a wide variety of market conditions over the last decade. So, if you’re unsure about taking the plunge, why not get in touch with one of the team at Bespoke Buyers, who can assist you with finding real value in the current market.