What’s Up For The Sydney Property Market in 2016?
A year ago, no one would have put his neck on the line and predicted two consecutive rate cuts by the RBA. The Sydney market was showing signs of bursting at the edges, and then came the news of rate slashes. One is inclined to believe that it made matters worse for the Sydney property market. Or did it?
APRA tightened lending regulations
No one was reading too much into APRA’s tightening of investor lending norms in January 2015 either and yet they had a considerable impact.
Where am I going with this?
Nowhere in particular, except that I am reasserting that it is not possible to predict market forces and their impact on several occasions.
Change of property cycle phase
Our property cycle is moving into its next territory and humans are averse to changes so we are likely to have lots of negative sentiments floating everywhere.
Story of the year gone by
How do I sum up last year? It was the story of two different races, one run at the sand track and other at the grass track. Sydney and Melbourne were clearly running on a different track. There were many markets which were digging deep in vain and clearly languished throughout the year. If the capital growth figures for combined capital cities have been decent, it is only because Sydney and Melbourne have done quite well. So, the ‘combined’ figure is an untrue reflection of the performance of many capital cities.
Interest rate has been a point of frenzied debate throughout 2015. They fell to never-before lows and gave investors something to cheer about: Their purchasing power increased, just as the devalued Australian currency enhanced the purchasing power of foreign investors.
Mining bust and its implications
It will be worth noting that when Australia was witnessing a mining boom, interest rates were increased to keep a leash on the construction sector and also to keep inflation from growing out of control. When the mining industry fell flat on its face, government had to bring the construction sector out of its forced slumber and this could only be attained by proposing rate cuts, which, to its credit, really did push through.
Trends likely to emerge for the Sydney property market in 2016
In 2016, we can look forward to a mellowed-down growth rate. NSW will continue to churn jobs at a rate that can be barely matched by any other state, and this will imply perseverant population growth and investor demand here. No points for guessing that the Sydney property market will lead the charge.
First home buyers will raise the bar of ‘rentvesting’ further. They will fulfill their dreams of investing and living luxuriously at the same time by investing in suburban properties and renting in the choicest locations. Really good news for the market on the whole because there was a time in the recent past when we felt first home buyers were completely elbowed out of the race.
It is also a cause for rejoicing that Sydney has found its way into the club of global hotspots and its prestige market is going to find favours, especially from newly rich Chinese investors. One area worth taking a close look at is the city’s popular Eastern Suburbs.