Login
ISCOVER
The Sydney market has been the “hottest” property market over the past 6 months, with dwelling values increasing by approximately 11 per cent since June and 13.2 per cent during the course of 2013.
This compares to the broader combined five capital city index of 8.6 per cent per cent per cent over the calendar year to date and 8.1 per cent per cent per cent over the past 12 months.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
Much of the recent debate concerning a “housing bubble” has focused on the Sydney market and in particular the strong value growth over the past 6 months.
Both the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) will be watching the Sydney market very closely over the coming months in order to monitor the rate of home value changes so that values do not become unsustainable, leading to further pain down the track.
Why is the Sydney market so hot at the moment and where is it headed?
The first point to note is that the Sydney market has witnessed extremely modest home value growth over the past decade at just 2.7 per cent per cent per cent per annum, which is close to the corresponding average annual rate of inflation. Accordingly, it is no surprise that the market has reacted as strongly as it has to lower interest rates.
One of the factors often overlooked is the limited supply of homes for sale in Sydney. Sydney currently has approximately 25,000 properties listed for sale, which is 25.8 per cent per cent per cent below the corresponding figure 12 months ago. The Sydney market has 11,200 fewer homes for sale presently than the Melbourne market and only 4,000 homes more than the much smaller Brisbane market.
Despite this, the number of property sales in the Sydney market over the 3 month period ending August 2013 was 25 per cent per cent per cent higher than the same period a year ago and approximately 16 per cent per cent per cent higher than the five year average.
So the limited stock on the market is selling and selling quickly, averaging just 27 days on the market compared to an overall capital city average of 55 days.
An important element of the Sydney market that policy makers will be closely monitoring (apart from the maintenance of prudent lending standards) is the extent of investor activity in the market. RP Data’s analysis confirms investors have been very active in the Sydney market over the past twelve months, participating in approximately 38 per cent per cent per cent of all unit transactions in that period and 17 per cent per cent per cent of all detached house purchases. Despite investor activity in Melbourne being slightly stronger, these activity levels are above long term averages. Policy makers will be keen to ensure that this level of investor activity does not become too great a proportion of the overall market, based on historical experience which suggests that markets which exhibit over exuberant investor activity tend to experience future heartburn when the market softens in the future.
RP Data’s mortgage platforms suggest transactional activity in November has remained strong, with November activity levels matching October’s record month of approximately 115,000 unique mortgage transactional events. Despite this, recent data suggests the Sydney market may already be beginning to cool, with the rate of value growth for the month of November likely to be around half the rate of growth exhibited in October (2.4 per cent per cent per cent), as affordability constraints begin to take effect.
Certainly the Sydney market will be a keen focus for policy makers in the months ahead.
Craig Mackenzie, General Counsel and Head of Corporate Affairs, RP Data
Craig MacKenzie is the General Counsel and Head of Corporate Affairs for RP Data. He is part of the Executive Team and reports to the Chief Executive Officer.
Craig has been with RP Data for the past 2 years, after having spent over 10 years in a similar role at Genworth. Craig is responsible for the legal, risk, compliance and corporate affairs functions of the business.
Before joining Genworth, Craig was employed as Corporate Counsel by General Electric Australia and New Zealand where Craig was the designated Legal Counsel for three GE Capital Businesses, including GE Mortgage Insurance Services.
Prior to joining General Electric Australia and New Zealand in 2001, Craig spent three years in London working for Herbert Smith, a leading UK Law Firm, where he focused on corporate mergers and acquisitions work. He moved to Herbert Smith from the Sydney firm Dunhill Madden Butler Solicitors.
Craig graduated from the University of New South Wales in Sydney in 1992 with a Bachelor of Commerce (Finance major) and Bachelor of Law Degrees.
