Sydney housing market emerging from correction: Moody's Analytics

Sydney’s housing market has started to emerge from its correction, according to the latest data from Moody's Analytics.

They found, Sydney apartment values began expanding from June, while house values enjoyed gains from July and, in both cases, modest improvement is forecast to continue.

House values will fall an average of 8.4% in 2019, before a 7.7% expansion in 2020. This follows a 5.5% decline in 2018.

Moody’s Analytics identified previous episodes of corrections over the last three decades (see Chart 11). This shows that the recent correction has been the longest and steepest on record for the Sydney market.

The most recent peak in house and unit values was around mid-2017.

Although unit values have corrected, it has not been to the same extent as houses.

Unit values are on track to fall by an average of 5.9% in 2019 after a 3.1% drop in 2018. An improvement of 7.9% is expected in 2020, followed by an improvement of 8.4% by 2021.

Click here to enlarge.

According to Moody's Analytics economist Katrina Ell, "house values in the City and Inner South area have passed their trough after a sharp decline through 2018."

"The Inner South West is on track to see a 12.9% fall in 2019, after a 5.3% fall in 2018. A 6% expansion is forecast for the Inner South West in 2020."

"The correction in Sydney is forecast to have largely passed by 2020, but home value growth will be far from the lofty gains of recent years. Housing values are forecast to rise by an average of 7.7% for houses and 7.9% for apartments."

"Areas outside metropolitan Sydney are mostly on track to escape the bulk of the correction."

"As potential homebuyers’ incomes have not kept pace with the Sydney housing market, demand has increased for areas outside of Sydney, where affordability is better."

"Areas including the Hunter Valley, excluding Newcastle, have become attractive destinations for those still tied to Sydney for employment but for whom purchasing property would stretch the household budget too far.

"These areas have adequate transport links back to Sydney for frequent commuting."

"House values in the Hunter Valley are forecast to fall by 2.1% in 2019 and rise by 3.6% in 2020, after increasing 6.6% in 2018."