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Sydney property market update

December 3, 2018 10:00 am by Upside

It’s been one of the most widely discussed topics in Sydney property news of late: the big, bad property market “crash”.

As predicted earlier this year, the Sydney property market has cooled off in recent months, in line with an aggregate yearly downturn of -4.93% on property values in Sydney, Melbourne, Brisbane, Adelaide, and Perth, according to CoreLogic.

The latest figures from the ABS also confirmed the anticipated slowdown: residential property price index data showed house prices in Sydney in the June quarter fell for the fourth consecutive quarter. Sydney prices were down 1.2% in the quarter, while Melbourne prices were down 0.8%.

So, should we be panicking about the end of the golden era for the Sydney property market? In a word, no. In fact, the recently-released Domain Property Price Forecasts Report forecasts house prices will hit a peak-to-trough fall of 12 % by mid-next year, before stabilising and then picking up speed again.

“We’re expecting prices to keep falling in 2019, before turning around mid-year and seeing some modest growth towards the end of 2019,” said Domain economist Trent Wiltshire.

Units have been less affected in the downturn and are even expected to turn around next year, after a peak-to-trough fall of 6%. Despite projections that apartment prices will fall by a total 3% year, Wiltshire expects an increase over the next two years of 3 to 5%. As a result, we could see an uptick in buyers leveraging off-market apartments as a key investment opportunity.

Likewise, ANZ’s new Housing Search Index suggests house prices may stabilise toward the end of the year, which is consistent with a recent stabilisation in auction clearance rates. ANZ’s findings were collated using Google search trends in Australia for topics one would be most likely to search for when buying a property (terms like ‘stamp duty’, ‘mortgage loan comparison’, ‘auctions today’, ‘moving company’, etc). Research has shown this data may correlate with the levels of economic activity in given industries, and thus could be helpful in predicting macro indicators relating to the strength of the Sydney property market.

How drastic the short-term drop in Sydney property values will be remains to be seen, but experts advise investors to control their cash flow and protect their equity for the time-being.

Right Property Group’s Victor Kumar tells Smart Property Investment: “If finance gets hard, you need to start to looking for more cash flow or stop buying for a little while. If you’re just starting to build out your portfolio, you've got to start from good fundamental areas and make sure you’re aware of the amount of negative cash flow you’re going to carry since you’re in the acquisition phase.

“You’re controlling the income and letting the wealth-creation or equity build-up happen in the background. In other words, look after your cash flow and the equity should happen.”

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