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

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Wednesday, 28 October 2015

Time lapse

35 years of Sydney house prices

Bravo Eliza Owen of On the House for this fabulous time lapse video presentation of Sydney median house values over the past 35 years. Enjoy watching it. 


There are a number of fascinating aspects to this piece, which suggested to me that home buyers and investors seeking long term capital growth should aim to buy in the best-located suburb that they can afford, and should also look for scarcity value.

Bellevue Hill had a median price which broke through $200,000 in 1980 - around double Sydney's median house price at that time - yet the median house price in the suburb has exploded to $4.2 million today, more than four times the median house price in the harbour city.

How so? A combination of a lack of new building - the result being scarcity value - combined with gross income and equity growth, with buyers and wealthy residents at the premium end of the market rarely reliant upon linear salary income for their house purchases. 

Other well located inner suburbs have demonstrated massively strong price growth as they have gentrified. 

Note how housing booms and corrections have been recurrent and have repeatedly been characterised by massive boosts in price in locations close to the city, with suburbs on the north shore and close to the water leading price booms and the western suburbs lagging behind.

Being located near a train line with a direct city link can help, particularly it seems on the north shore (cf. Killara, Gordon, which have historically led price growth in previous cycles).

On the other hand being in an industrial suburb under a flight path, historically at least, has been a negative, with inner western suburbs such as Mascot having lagged through the cycle. 

Due to this disparate nature of capital growth which has favoured suburbs closer to the city, the On the House figures show that today there is a significantly wider range of median house price values by suburb across Sydney than there was in the past.

I expect this widening of prices to continue. 

With a good deal of building having taken place on Sydney's outer south western fringe, median home values have increased sharply in that sub-region since 2011.

However, recent auction results (or more accurately, should one say, the dearth of positive results at auction, with the outer south west recording a worrying preliminary clearance rate of "n/a" this week) suggest that a sharp correction could be in the post for that sub-region.

Very interesting stuff.

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Huge day ahead for interest rate twitchers with the pending release of the third quarter inflation figures later this morning.