Sydney house prices to recover from next year: ANZ
A combination of steady population growth and weak home completions will ensure the national housing market continues to “simmer”, with Sydney market best placed to benefit from these market dynamics, according to ANZ’s latest Australian Housing Snapshot.
The report says the Australian housing market will avoid a “boilover” (predicted by the likes of Harry Dent and Steve Keen) provided “domestic economic conditionsremain stable enough to support household finances”.
The report, compiled by the bank’s property and economics team, led by its head of property research, Paul Braddick, says that despite weaker sentiment Sydney prices are expected to start rising slowly through the second half of the 2012 due to increasing rents and deteriorating rental affordability, which will encourage first-home buyers to enter the market and attract investors due to higher rental yields.
“Sydney house prices have been the most resilient across the capital cities, with prices edging 0.3% higher over the year to August, compared to a 3.2% decline in the capital city average. This reflects a number of factors, including a degree of ‘catch up’ following many years of house price underperformance,” the report says.
Source: ANZ
ANZ notes that NSW annual population growth is expanding at a relatively healthy 1.1%, which combined with a sustained period of under-building will mean the current NSW housing shortage “will worsen with just 58,000 dwellings forecast to be completed over the next two years [to June 2013], falling well short of underlying demand over the same period, which we estimate at 103,000”.
It also notes tightening Sydney vacancy rates (1.3%) with rental growth starting to accelerate increasing by 5.9% over the year to June 2011, while advertised rents are already running at 8%.
The recent pick-up in net arrivals in New South Wales should boost population growth and drive rental vacancies lower from mid-2012, according to the report.
“With ongoing pressure from yield-seeking investors to increase rents and moderate house price falls making housing purchase affordability easier, housing finance to the first home buyer segment should begin to gain momentum. This will be fuelled by the added stimulus of first-home buyer stamp duty concessions that have been rolled out from 1 July 2011,” the report says.