March 2017 | Autumn quarter

Eight factors driving real estate in 2017

Curious to know what the year ahead holds for the Sydney property market? Here's the inside word from your on-site real estate experts on the indicators to look out for to ensure you remain ahead of the game:

1. Prices continue to grow for the fourth consecutive year at a steady rate, with the medium price for the average freestanding home now more than $1,000,000 

Capital growth is the defining metric of the real estate industry. There is no purer test of market performance and resilience. Positive capital growth numbers over a sustained period, especially relative to inflation, indicate above all else a strong market, and give an indication of asset security. In layman’s terms: regular and steady appreciation of housing prices over the past four years has established a solid foundation upon which the coming year will be built. The most effective agents will use this information to establish accurate expectations of sale price and asset growth. 

2. Interest rates continue to fall with the cash rate now at a record low 1.5 per cent 

There are many causal links in the housing market. The classic example refers to interest rates. A record low cash rate means a record high capacity for borrowers to take on low interest debt. The easier it is to access low interest debt, the more buyers you have entering as active participants in the market. The more buyers you have in the market, the more leverage the sellers have to achieve the sale price they desire. It’s a neat progression, and all results in healthy competition. With the cash rate forecasted to remain below 2.5 per cent for the foreseeable future, now is the time to take advantage of buyer numbers for your home. 

3. The major banks continue to post approximately $30 billion dollars in profit in 2016 

Profit based incentive is the clearest motivation for the banking industry. The borrowing rates they set are informed by the RBA cash rate, but in fact are dictated by their company margins. With the ‘Big Four’ all recording strong profits over FY 2015/16 the borrowing market remains bright, especially for the much-maligned first homebuyer. Growth expectations for the major Australian banks remain positive, and this can be expected to hold their rates at levels similar to current conditions. 

4. Auction clearances continue to rise well over 80 per cent (90 per cent in some parts of Sydney) 

Clearance rates give the best indication of the relationship between housing supply and buyer demand at any given point in time. High rates provide stark evidence of collective buyer desperation. Consistent reports of over 80 per cent clearance throughout Sydney indicate that demand from prospective buyers is outstripping supply of the properties they want, or they simply need to get a foothold of some description. This is good news for homeowners, as the bargaining power resides with them. If price expectations are well informed, then you can expect multiple parties to be looking to bid on your property. 

5. Sydney population continues grow by approximately 100,000 new residents each year, total currently exceeding 5 million people

Population growth is a real factor in the forecasting for real estate across so many of the world’s major cities and Sydney is no exception. Increasing numbers throughout the next decade should lock in the high levels of buyer competition that we’ve recently seen. This is particularly relevant in already desirable areas such as the south east that offer so many sought after property features and good proximity to the coast. 

6. NSW continues to outperform every other state in Australia for job growth, population, major government infrastructure projects, tourism, real estate prices, and cash in bank

When people discuss the ins and outs of their ideal property, they can usually be grouped into two categories. The first relates to the physical nature of the property itself, the second refers to its context. Context in this sense means public infrastructure: parks, roads, beaches, jobs, schools and more. NSW has proven itself to be a cut above in this regard — showing focus and insight in approving infrastructure projects such as the South East Light Rail Network, which is adding and consolidating value throughout Randwick, Kingsford, Kensington and surrounds. 

7. International residents see Sydney property as the driver of confidence for investment property, and are currently purchasing some of Sydney's best property

International investment in any market is a pure indicator of strength. The most classic example is currency — if ever you want to know how your country is performing on the larger global stage, look at the levels of foreign investment in its currency. The same applies for real estate; with greater foreign investment comes an endorsement of both market conditions and city infrastructure. It also adds more buyers to an already competitive pot. With positive development prospects in the pipeline this can be expected to continue into 2017. 

8. Genuine continued shortage of all types of residential property in 2016 is set to continue in 2017 

The first rule of economics is supply versus demand. With four consecutive years of strong growth and selling conditions in Sydney, it cannot be expected that suburbs will see the same turnover percentages year upon year. At some point, supply levels get exhausted and new homeowners need time to accumulate capital appreciation. This naturally increases the leverage for anyone still holding a saleable asset, assuming buyer demand remains equal. All of this points to the conclusion that if 2017 is a home selling year for you, conditions are ripe to achieve some fantastic results!

NG Farah Project Marketing

NG Farah Project Marketing
Shop 1b, 1 Pine Avenue, Little Bay
T: 02 8020 0730
W: www.ngfarah.com.au

Peter Goulding
M: 0413 129 695
E: peterg@ngfarah.com.au

Steve Ausling
M: 0435 207 078
E: stevea@ngfarah.com.au

Joe Recep
M: 0438 600 999
E: joer@ngfarah.com.au

Alix-Marie Gatt
T: 02 8020 0730
E: projectmarketing@ngfarah.com