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Has the Time for Property Investment Passed for Sydney?

affordabilityMichael Yardney has been very clear in dismissing any noise which says Sydneysiders have missed the “property boat”. In an article for the website Property Update, he says that rather than making spur of the moment decisions about a market, one must coolly judge figures and statistics. The good thing about stats is that they don’t lie! Only this time, he treads a little more carefully and talks with a more balanced perspective.

So some of the data first:

  • By 2031, NSW will house 2 million more residents. A majority of these people will live in Sydney.
  • Birth rate will be double the death rate and net immigration will be three times the net emigration.
  • Because the population will keep ageing (and there will be more senior citizens due to higher life expectancy), we can look forward to more single households.
  • It will be quite a difficult job matching housing stock with population growth.
  • Housing approvals are at a record high. 52,000 approvals were made in the year that went by.
  • There will be a record number of apartments by 2018.
  • The ratio of apartment to houses will grow as Sydney becomes more apartment-centric, like other mega cities across the globe.
  • Residential construction will be focused towards the areas where there are more jobs. This shall be the government’s initiative to reduce commuter worries.
  • Living standards of NSW (which is already 75% higher than the national average) is likely to get only better.

Long term growth indicated

Yardney uses these data to infer that the economy of NSW is buoyant and it will mean that the demand for the ‘suitable’ property will never fade. This means that the long term growth of Sydney won’t be compromised. There is a caveat though: the interest rate is at its lowest and this might mean that members of the Gen Y hitting the real estate market now and making a property investment are locking in at a price which might squeeze them in the longer run (when the price finally begins to rise).

You can read the original article here.

Supply-demand imbalance

I think that while there will be corrections in the property market and growth cycles will move through their various consolidation phases, Sydney should continue doing well because its supply will never quite meet up with the demand, say, starting from a decade from now.

While this is good news, it also portends that the construction industry will have to be on its toes to ensure that the increasing population does not cause a price explosion.