Value Growth To Slow Down in Sydney

Sydney will continue to grow but nowhere as illustriously as it has been doing over the past year. An article on the website Smart Property Investment suggests that  property growth is likely to slow down to 4% and stay there for the next 5 years.

15% rise in value growth

Between the period Feb 2013 and Feb 2014, Sydney has grown at a robust 15% or so. But prices are close to hitting their highest mark (after which the question “is it affordable anymore” begins to arise.) because wages and household incomes have not shot up in proportion to the prices.

Demand-supply dynamics

Demand for an asset, says the article, is expected to diminish (along the lines of economic theory) as prices become near unaffordable. Sydney is certainly going to impact other capital cities, ones for which Sydney has become a yardstick of sorts. The article argues that Sydney’s rate of unemployment won’t help the situation either, given that unemployment reflects very badly on consumer sentiment.

You can read the original article here.

Years of undersupply

In my opinion, Sydney’s property market has- at least partially- flourished due to years of undersupply. Really low interest rates along with a risen-from-slumber construction industry have given the harbour city the kind of momentum it has witnessed.

Sustainable growth expected

I would still like to believe that the hike is nothing much to write home about in real terms. After all, the prices are looking robust also because they have succeeded a few cycles of price plateaus. In the year 2013, detached houses shot up in prices by a phenomenal 15.6%.

Its peer, the units, shot in value by 11.6%. There is every reason why value growth should come down to a more realistic and sustainable 5%.