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Value Growth in Sydney May Come Down

affordabilityIn an article for the website Your Investment Property, Phil McCarroll talks about the moderation in property growth expected in Sydney and Melbourne in the months to come. Experts believe that it may not be wise to predict a complete downturn for the two capital cities but a “moderation in strength” is certainly on the cards.

Factors which won’t let Sydney slide too much

The high level of construction, buoyant consumer mood and low interest rate environment won’t let the two big capital cities slide down the lane any time soon. Moderation is surely expected but this only answers to the lengthened strong performance of the markets.

Dwelling prices/household income

While the houses in these cities are a tad overvalued, low interest rates are compensating for the high price stickers. What is a concern though is the figure ‘5.6’ which is the present ratio between price of dwellings and household income.

Depreciated Aussie dollar

Value growth, to reiterate, is definitely going to mellow down but the depreciation of the Australian currency will also mean that the foreign buyers take a lot more interest in our market, helping in overturning its present softness.

You can read the original article here.

The consumer sentiment is definitely on a high and there are quite a few reasons for it but if Sydney deviates from the economic fundamentals, it cannot expect not to find difficulties in the way. Today, the low interest rates may insure investors against a large mortgage liability but what do you think could happen when the interest rate corrects itself?

Prices to mellow down

The construction rate is atypically high and we are compensating for long years of undersupply. It is heartening to know that the red tape may also come down this year onwards but I don’t think value growth will have a significant effect to show for high level of construction. We are in the consolidation stage of the property cycle and prices are only expected to mellow down.