Sydney property boom: Buy now before prices soar?
Sydney's property market is booming, with predictions that prices will increase 10% by the end of the year. Should you act now before prices surge out of your budget?
There are a number of clear signs that Sydney's property market is on the move, including auction clearance rates that hit a 24-year high earlier this month, and first home buyers taking up around 25% of the market.
So if you're planning to buy a property this year, does this mean you need to act now before prices climb out of your reach?
Or should you wait until incentives fall back and first home buyers retreat, so there's less competition in the market?
Sydney-based buyer's agent and economist Rich Harvey from propertybuyer suggests you may be better off taking action sooner rather than later.
"We expected the year to start strong, but the depth of buyers coming out of lockdown has been huge – there's a lot of pent-up frustration from last year and now people are ready to take action and achieve their home ownership dreams quicker," Harvey tells Finder.
"They couldn't go on holidays last year so they have a bit more money to play with. Add in lower interest rates and greater borrowing power, and it's become a very competitive market."
Harvey predicts that prices across Sydney will rise by an average of 10% by the end of 2021, a forecast shared by Westpac economists, who are pegging an increase of 10% this year and another 10% next year.
AMP chief economist Shane Oliver also believes prices will rise this year.
"I'm as surprised as anyone by how quickly the market has bounced back," he tells Finder.
"Normally when you have a recession, and this was the worst one we've had since World War II, you'd normally see quite a sharp fall in prices and it takes a while to turn things around. We've had a number of government incentives, which have literally preserved the economy, and they're playing a big role in bringing demand forward."
Sydney home sells for $500k over reserve
Harvey says evidence that the market is swiftly heating up is already evident, with some suburbs and properties attracting huge interest.
"I went to an auction in St Ives last weekend for a 4-bedder that backed onto the bush. It needed a full renovation, and I was one of 21 registered bidders – I don't think I've been to an auction with that many bidders in my entire 20-year career as a buyer's agent!" he shares.
This is how the auction played out:
- The agent "underquoted slightly" with a price guide of $1.65m.
- The reserve was set at $1.7m.
- Harvey predicted the home would sell for around $1.9m.
- There were three active bidders right till the end.
- The property sold for $2.2m – $500,000 over the reserve.
Harvey clarifies that there is slower demand for apartments with far fewer buyers in the market.
"For an apartment, you might have 1 to 3 registered buyers, whereas on a house, it could be 20 bidders you're up against," he shares.
Houses are a different story, and right now are "a very competitive market to buy into".
Property prices to stay firm
"There's definitely a bit of FOMO driving prices at the moment, but at the same time, buyers who are sitting by thinking that it's all going to slow down and they'll wait to buy then might be waiting a while. It's not going to slow down. The volume of properties that need to come on the market in the prime areas is just not there," Harvey says.
"That said, I think there will be more volume and choice in a few months' time. But prices won't go down."
Oliver agrees that prices are not likely to fall, but warns that we "could start heading into some sort of [price] euphoria".
"The positives have dominated and totally swamped the fact the unemployment is high, wage growth is low, we have an absence of immigrants and weak inner-city rental markets," he says.
"If lending standards are tightened… we know from a few years ago that it's a strategy that ultimately works to slow down the market. Sooner or later, this hit to immigration might start to weigh more [on demand], particularly inner-city apartments in Sydney and Melbourne. But any abatement in price is quite a way off yet."
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