Is the Sydney property boom over and done? – John McGrath

Here’s what he had to say:

What an incredible growth period Sydney has had over the past three and a half years.
Latest figures from CoreLogic RP Data reveal Sydney’s median home values (all properties combined) have risen by 48% since the growth cycle began in May/June 2012.
Melbourne is up 31.5% over the same time-frame, with Brisbane next at 15%.

Among the other capitals: Darwin 12.6%; Adelaide 10.9%; Perth 10.7%; Canberra 9.6%; and Hobart 6.3%. On a national scale, it’s clearly been a two-tier market led by the East Coast since 2012.
But now things are slowing down. Sydney has cooled but I’m not concerned.
What is really important to realise is that Sydney will not stop growing in value, it’s just going to settle and return to a normal long-term pace of incremental growth.
Yes, I think it’s fair to say the boom in Sydney is probably over.
Auction clearance rates have dipped from the 80% band mid-year to the 50% band now and that’s quite a drop.
Of course, supply has increased over Spring but that alone doesn’t explain a 30% decline in clearances.
The market is simply cooling down now and that’s a really good thing.
After such a long run of growth, we really need some consolidation now.
New price benchmarks have been set for all types of properties right across the city.
We need time for those prices to be cemented in.

What has slowed Sydney down?

There are three major factors here:
1. A tightening of lending criteria for investors has had a significant impact, as investors have been a driving force in this boom
2. Many investors who still meet lending criteria are now looking outside Sydney.
When you get rapid capital growth, rental yields inevitably decline and that’s the case in Sydney, with houses yielding 3.2% and apartments 4.1%.
Brisbane offers the highest yields of the major capitals at 4.3% for houses and 5.3% for apartments – and more importantly, Brisbane has greater scope for imminent capital growth
3. It’s simply time to slow down.

Remember, the real estate markets is cyclical.
At some point in a growth cycle, every market will reach a peak and plateau.
When markets begin to cool, it’s inevitable that we’ll see small drops in prices month-to-month and that’s what happened to the Sydney market in November.
The median house price fell -1.5% and apartments -0.7%.
But there’s no need to be too concerned as this was expected.
This is normal at the end of a boom.
We need to distinguish between the end of a boom and the end of a growth cycle.
It’s the end of the boom, not the growth cycle.

So in conclusion, let’s take a snapshot of property values in 2015

The numbers are in…
Sydney 

• House prices up 13.2% to $950,000
• Apartment prices up 11.1% to $675,000

Melbourne 

• House prices up 10.9% to $675,000
• Apartment prices up 3.4% to $503,500

Brisbane/Gold Coast 

• House prices up 3.8% to $512,000
• Apartment prices up 2.4% to $385,000

Canberra 

• House prices up 5.6% to $625,000
• Apartment prices down -0.5% to $422,500

Perth

• House prices down -6.1% to $515,000
• Apartment prices down -3.4% to $415,000

Adelaide

• House prices up 1.4% to $435,000
• Apartment prices up 1.8% to $342,000

Hobart

• House prices down -2% to $355,000
• Apartment prices up 3.6% to $291,500

Source: CoreLogic RP Data, January 1, 2015 – November 30, 2015  
This will be my final column for the year.
I’ll be back with my market predictions for 2016 in mid-January.
I’d like to wish you and friends and family a wonderful Christmas and a relaxing holiday break.
If you’re still out there in the market looking to buy, we hope to assist you with a fresh range of homes that will hit the market in late January/early February.
Best wishes for a happy and safe holiday period.