Sydney is declining, but doesn’t know it: Terry Ryder

There’s little doubt that the Sydney slowdown is under way.

I note that the boffin who runs APRA is trying to claim credit for a reduction in investor activity, but the wind-down in Sydney sales volumes pre-dated his misguided measures to prevent investors from buying real estate.

In terms of sales activity, Sydney peaked way back in the December Quarter of 2013. Auction frenzy and price growth has continued because sales levels have fallen away only gradually. And history shows that markets take time to adjust to new circumstances. Sales activity can be falling for six months or more before prices start to react.

Transactions in the March Quarter 2015 were down on the December 2014 Quarter and also below the March 2014 Quarter. The June 2015 Quarter has shown a further gradual decline. 

The most telling barometer of the Sydney slowdown is the number of individual growth markets, as revealed by Hotspotting’s quarterly research for the Price Predictor Index. 

The February research found 118 suburbs with rising sales activity across the Sydney metropolitan area. The May survey found 72. The latest research finds only 36 suburbs with a growth trajectory.

The dominant market type in Sydney now is what we call “plateau” markets. These are suburbs where sales activity was previously rising, but now sales levels have tapered off – still at a healthy level, but below the peak activity.

This is an indicator that the market is beginning to loose its heat.

Another indicator that the cycle has almost run its course is that the leading growth markets are on the fringes of the metropolitan area.

The leading precincts, still with growth markets, are the Campbelltown (far south-west) and Penrith (far west) municipalities.

Other areas still hanging in there (lots of plateau markets) include the Bankstown, Blacktown and Parramatta municipalities.

Yet another sign that the boom cycle has moved on is the performance of regional New South Wales markets. I’ve reported previously that Sydney’s momentum has rippled out into regional centres – firstly those close to Sydney, like Wollongong, Gosford and Newcastle, and more recently those further afield.

The latest survey shows that Regional NSW has considerably more growth markets than Sydney does – almost double the number, in fact. 

Sydney is declining, but doesn’t know it, while the state’s regional cities are increasingly buoyant.

Tuned-in investors will have moved on from Sydney some time ago. The price growth of the near future will be found in places like Port Macquarie, Albury, Goulburn, Coffs Harbour and Tweed Heads.

TERRY RYDER is the founder of hotspotting.com.au. You can email him or follow him on Twitter.