Sydney property price playing catchup: ANZ's Philip Chronican

Sydney's recent real estate price gains have been "catch up", according to the ANZ boss Philip Chronican.

"For all the talk of a property bubble, when you look at Sydney real estate versus the rest of Australia, what has been happening is again more just a sense of catch up," Chronican wrote on the bank's bluenotes website.

"A decade ago it would have been a bit obvious to say NSW was driving the Australian economy but it does actually sound slightly odd to be saying that today.

"After all, NSW has no iron ore, no LNG, tourism slumped in the decade after the Olympics and NSW property prices have lagged the rest of the country.

"But NSW is returning to pre-2003, the last time it out-performed the Australian economy."

He said his view had been reinforced by a recent tour of the state with the period between 2003 and 2013 "something of an aberration".

He said there was no doubt there was a hangover in NSW after the Olympics, following a period when the economy and the property market had grown excessively.

"Then the rest of Australia took off, particularly Western Australia and Queensland, with the resource investment boom. 

"The story today then is one of recovery," he said adding ANZ’s chief economist Warren Hogan had been emphasising how strong the NSW outlook was in recent research.

"The unemployment rate in Sydney has fallen below 5% compared with a jobless rate of more than 6% for the rest of Australia," wrote Chronican.

"Construction and real estate employment have risen, international student arrivals are up, the latest NSW budget showed improved operating balances and lower net debt.

"The NSW economy is expected to be buoyed by substantial infrastructure spending in coming years as an expected $20 billion in proceeds from the privatisation of electricity networks is invested in new projects.

 "On the property front, Sydney is no longer massively over-priced relative to the rest of the country."