4 Reasons Why Sydney’s Property Market Will Run Hot All Year

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What an unexpected surprise 2021 property markets have been for anyone who made bold predictions 12 months ago.

When the pandemic’s economic fallout began, many so-called experts reported about a looming real estate price crash.

And some of those forecasts seemed justified. There were huge numbers of newly unemployed Aussies lining up outside Centrelink, while uncertainty about our nation’s future was rife. At the time, bank economists predicted 20 to 30 per cent falls in house values.

But, as the saying goes, if there’s a difference between the map and the ground, the map is wrong.

Here we sit in February 2021 and property markets across most sectors are experiencing a very strong upswing.

CoreLogic data on capital city home values to the 14th February 2021 show that dwellings in our five biggest cities rose 1.7 per cent over the past 12 months. In Sydney alone they increased 2.2 per cent. While that isn’t a massive increase, nonetheless during a very turbulent year amidst a global pandemic, it is significant. And now, in February, 2021, Sydney’s market is pushing on. Auction clearance rates for the past 3 Saturdays have nudged around 90%. These are the highest clearance rates since 1997.

The big question is, ‘Can this run of price growth be sustained throughout 2021?’
I believe it can, but only in select locations. Here’s why.

1.The fundamental need for shelter
Firstly, property provides one of life’s basic necessities… shelter.
As such, property is not simply a tradeable asset but an essential element of survival, so demand from people wanting a roof over their heads isn’t going away anytime soon.
Therefore in a city like Sydney, where the physical supply of good quality housing in prime locations is physically constrained, property will maintain value.
This equation is doubly so for blue-chip locations. If a home is close to water, parks, great convenience facilities, transport infrastructure, school zones and lifestyle options, then there are people who are willing to pay a premium to live there.

2.Our economy is relatively open and positive
Despite shutdown measures and sporadic outbreaks, New South Wales’s approach to controlling the virus has been exceptional, which is great for our local economy.

Obviously, there will be challenges ahead. The finalisation of government assistance coupled with stymied overseas trade and uncertainty about international travel are all hurdles to be cleared.

That said, more and more Sydneysiders are earning an income. Australia’s unemployment peaked at 7.5 per cent in July 2020 and fell to 6.4 per cent in January 2021 according to ABS numbers. Just another sign we are on a positive path forward.

3.Finance is freeing up
Around the time of the Royal Commission into Banking and Finance, a raft of regulations designed to slow investor lending were issued by the banking regulator APRA – and many would argue they went too far in stifling the market.

Fast forward to 2021 and responsible lending laws are up for review to free up credit and encourage economic growth.

So, a heady mix of extraordinarily low interest rates coupled with lower lending hurdles will assist Aussies looking to borrow more – a good thing for our economy overall, but an excellent outcome for house prices.

4.Scarcity pays dividends
One of the early market surprises during the pandemic was the financial resilience of Aussie homeowners. Instead of a wave of forced sales hitting the market, most who planned to sell in early 2020 chose not to. As such, those buyers keen to snap up bargains were left disappointed as they were faced with dwindling listings and firm prices.

And this continues, particularly in Sydney’s blue-chip suburbs.

For example, Inner West locations such as Balmain have all the hallmarks of desirability, and supply has remained tight. A search of SQM Research data shows monthly listing numbers in Balmain peaked in March 2019 at 81. Compare that to total listings of only 44 in January 2021 and you can see why prices are strengthening.

The signs remain positive for Sydney’s prime property heading into the year. The most obvious way to capitalise is to buy now and beat the gains by using the services of a well-connected buyers’ agent with years of experience. We can help unearth the right property for you now, so you don’t look back in regret at missed capital growth and higher buy-in prices come year’s end.

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