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

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Friday, 6 June 2014

Sydney unit prices to rise 15% in 2 years

Notes BIS Shrapnel, as reported by Property Observer:

"According to BIS Shrapnel, behind the strength of the property market are low vacancy rates, low interest rates, relatively attractive yields and the expectation of capital gain.
BIS Shrapnel’s Apartments in Sydney Suburbs 2014 to 2019 report points to strong off the plan sales, which will underpin further rises in new high density apartment construction.
No oversupply is expected, but vacancy rates should ease and reduce pressure on prices “by the time the Reserve Bank starts looking at tightening interest rate policy” the report notes, suggesting that off the plan sales will come off their peak over 2016.
Senior manager and report author for BIS Shrapnel, Angie Zigomanis, said that the peak in apartment prices and sales by 2004 did result in the market being overvalued and oversupplied.
“The subsequent downturn resulted in the oversupply being absorbed by 2006/07, but it took several more years of rental growth before returns increased sufficiently for residential property to become attractive to investors again,” said Zigomanis.
“By the time interest rate policy was eased at the end of 2011, the Sydney market was coiled like a spring, and ready to take off,” he said.
“Successive cuts to interest rates continued to reduce the gap between rental income and mortgage repayments, causing investor demand to surge and drive up prices.
15% forecast increase in unit prices over the next two years
Overseas buyers’ influence was also noted by Zigomanis, noting they’ve been buying apartments within inner Sydney and selected centres.
Gen X and Gen Y are also starting to contribute, with owner occupiers’ presence growing. Notably, however, investors are still the overarching dominance in the Sydney apartment market."