Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics
Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

Ryde and Sydney's inner city suburbs are set to be the hardest hit in the housing downturn, according to Moody Analytics CoreLogic's Hedonic Home Value Index. 

After experiencing a 15.6 percent increase in house value in 2017, Ryde has a forecasted median house price drop of 9.2 percent.

The value drop is expected to carry on in to 2019, with declines of just over three percent predicted.

Sydney city and inner south suburbs, which have seen house value increases of over 70 percent since 2013, saw nearly the same percentage of house value increase as Ryde last year.

The house values are expected to drop 8.7 percent this year.

Unlike Ryde however, the house values in the city and inner south suburbs are expected to rebound in 2019, with a predicted jump back of 7.6 percent.

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Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

CoreLogic's latest release suggests the Sydney housing market 'remains in a funk.'

The dwelling price drop in April was a ninth consecutive month of falls.

The prior upward cycle began around 2013, and from there to mid-2017 dwelling values across Greater Sydney increased 70%, according to the CoreLogic Hedonic Home Value Index. Since then, values have declined 4.2%. 

The strong dwelling price growth was borne out of the upbeat state of the economy, low unemployment figures, public infrastructure investment and the prevalence of interest-sensitive industries such as hospitality and construction.

Incomes in NSW have grown faster than the national average and underpin some of the recent gains in home values (see below). 

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Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

However, housing values have grown even faster and thus are overvalued relative to equilibrium value.

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Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

CoreLogic expect house prices across Greater Sydney to fall by 4.7% y/y in 2018, after a 12.8% gain in 2017.

They expect apartments to also slow but not as sharply, with a 0.6% y/y expansion expected in 4 2018, from the 9.8% growth in 2017.

By 2019, the correction is expected to have largely passed, with house and apartment values forecast to increase by 0.9% and 2.2.

Apartment values in Sydney have not experienced the same degree of growth as houses in recent years, and so are not expected to correct as sharply over 2018.

Historically, apartment values are less volatile than houses. 

Supply constraints factor heavily in Sydney’s housing market and contributed to the strong runup in prices in prior years.

A high level of supply has now come on line for apartments in the inner city and surrounding areas as well as dwellings in suburban areas via land releases and removing some development restrictions. This will contribute to the forecast price slowdown in 2018. 

Outside Sydney, the story of the housing markets in rest of the New South Wales is a little different.

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Ryde and Inner city Sydney values to be hardest hit: Moody's Analytics

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

This is especially so for areas such as the Central Coast, where house values are forecast to grow 4.3% in 2018, after a 13.4% increase in 2017.

Illawarra and Newcastle and Lake Macquarie areas have a similar story. Robust local economic conditions are driving house values in these areas

However, regional areas farther away from Sydney where population growth is slower and supply constraints are reduced, such as New England and North West or Hunter Valley, have lagged.

House values in New England and North West grew a tamer 1% in 2016 and in 2017 and are forecast to increase 5.5% in 2018 and 4.5% in 2019.

Melbourne's biggest drops are predicted to be in the inner south, while Brisbane has seen off the worst of its price falls.

Nationally there's set to be a cool, but no crash.


 

 

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Sydney Cooling Off

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