Sydney tipped for housing improvement in 2013
Forward-looking indicators, including building approvals, of residential construction point to a modest recovery in the near future. This is supported by a pick-up in dwelling prices, sales activity, rental yields and loan approvals since mid 2012 according to the Reserve Bank.
Balancing a number of economic factors, the Reserve saw merit in lowering the cash rate by 25 basis points to three per cent – a level not seen since the height of the GFC – aimed at fostering sustainable growth.
Despite being at historic lows, financial markets expect further easing of monetary policies in the New Year. Whilst the banks have failed to pass on interest rate cuts in full, interest rate cuts nonetheless have a profound effect on property markets.
With some fixed home loan rates in the low five per cent bracket, the market will present properties that pretty much pay for itself even if it doesn’t have a sky-high yield.
As a result, the current buyers’ market might soon be fading as investors become increasingly attracted to brick and mortar investments in 2013, particularly after being burnt by the volatility of the share market over recent years.
Housing demand and consequently dwelling prices have been and will continue to be enhanced by population growth and an increase in net migration which is now 18 per cent higher than 2011 with New South Wales and Victoria being the preferred states of residence according to the Department of Immigration.
Considering the five capital city aggregate (Sydney, Melbourne, Brisbane (inc. Gold Coast), Adelaide and Perth), dwelling prices in Sydney are already on the right track with the latest November 2012 RP Data-Rismark Index showing strong year-on-year growth, up 1.30 per cent for houses and 1.55 per cent for unit. This compares to negative 0.11 and negative 0.36 per cent for houses and units for the aggregate.
Look ahead, this growth trend is likely to continue. Here’s to a prosperous 2013!