Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Monday, 31 August 2015

Inner suburbs hot for-evuh

It's set to be a monester week of data releases ahead, from tomorrow in particular, but before that a quick look at the weekend auction results.

Core-Logic-RP Data reported its preliminary auction stats which showed stronger initial results than one year ago in Melbourne, Brisbane, and Perth.

Sydney recorded another vigorous result of 78.1 per cent, which was stronger than the final result for last week of 76.2 per cent, but for the first time this year was below the preliminary clearance rate from one year ago at 79.9 per cent.

Sydney's incredible run which has seen house prices rising at a pace of well over 20 per cent per annum has continued right the way through until the final week before the spring selling season.

The result of 78.1 per cent this week will doubtlesss lead to some premature extrapolation, but there are a few reasons why the Sydney market probably has a bit of a way to run yet before it runs out of puff.

Firstly while auction volumes have been tracking at the highest level we have seen, total listings are still moderate, and less than those of Melbourne and even Perth.

Secondly, in the inner- and middle-ring suburbs that matter, clearance rates are still tracking at exceptionally high levels.

According to CoreLogic-RP Data the Eastern Suburbs (87.6 per cent), North Sydney & Hornsby (86.3 per cent) and the Inner West (85.1 per cent) had the strongest clearance rates, followed by Blacktown (84.6 per cent), City & Inner South (82.8 per cent) and the Northern Beaches (81.5 per cent).

Although these are only preliminary results, traditionally it is said that results above 80 per cent point towards a "boom time" property market.

And thirdly, John McGrath ignited some debate earlier this year when he claimed that Sydney's inner suburbs will be "hot forever".

While this obviously isn't set in stone, simple geometry tells you that within the inner 6km there are only 113 square kilometres of land for which there is huge demand. 

Nothing is certain, of course, but personally I wouldn't bet against it. 

It's precisely what has happened in prime central London over the last couple of decades.