How’s The Market?

Despite the negative talk surrounding property prices in 2016, it is now becoming apparent that what experts warned could happen has not actually happened.

The May interest rate cut has stimulated the Sydney housing market right at the time that many felt the boom was done for.

Many economists will state that this is unhealthy for the economy and they may be right. However, if you are trading in the current market, it is crucial you watch what is happening in the market rather than reading reports on what is expected to happen.

As a purchaser, if prices are too high and you feel they could fall at some stage in the near future, it may be better to stop looking. Trying to buy a property below market price means you are likely to waste a heap of time and money in due diligence. If you are intent on purchasing in the current market, you need to take reports, forecasts and opinions with a grain of salt. The only thing that matters is the market conditions in front of you on the day.

As a seller in the current market, there is no need to get caught up in the negative sentiment that has prevailed for much of 2016. Interest rates are at record lows, stock levels are tight right across Sydney and the New South Wales economy is strong.

The immediate risk for the market would be a sharp rise in unemployment or further tightening by APRA on bank lending. Even the Sydney apartment market that many predict to crash is performing well from a historic perspective.

Despite all the talk, it is crucial to recognise the Sydney apartment market is not the Melbourne or Brisbane apartment market, both of which are over-supplied.Indeed, the impetus for the wave of apartment construction in Sydney was to address undersupply.

The undersupply in the market needs to be addressed before we even begin a discussion on oversupply. Lend Lease sold 391 apartments in their Darling Square development in just 5 hours after release on the last weekend of May. That does not suggest anything but demand exceeding supply.

The greater risks with the Sydney apartment market is buyers overpaying and/or the quality of construction with off plan purchases. Neither of these risks are necessarily apparent or identifiable at the point of purchase, which makes managing the risk tougher.