Sydney housing valuations have improved markedly in recent years, with its price premium to the other capitals still at levels not seen since the mid-1980s.
Sydney property market housing is also built upon relatively strong foundations. Supply is tight, following a decade of declining construction activity and strong population growth. There also appears to be a shortage of homes for sale, and rental vacancy rates remain below the national average.
Sydney’s employment market is also performing relatively well. Unemployment is below the national average, whereas full-time jobs and aggregate hours worked have grown at above average rates, which should help support housing demand, values and rents. One caveat to this is that national incomes will have difficulty rising in the next three years as Australia slogs its way through the post-mining boom adjustment.
For now, mortgage demand appears to be growing strongly in Sydney. However, one area of concern is FHBs. To date, their absence from the market has slowed the rebound in prices when compared with previous rate-cutting cycles. Investors have picked up the slack more aggressively this year as the cash rate fell to record lows; although the situation could easily change in the future.
Overall, Sydney’s superior fundamentals and current momentum should see it continue to outperform the broader housing market in the year ahead.