Capital cities to perform in 2014

Capital cities to perform in 2014

Posted on Thursday, March 27 2014 at 11:45 AM

We all know Sydney had incredible growth in 2013, with house prices increasing by more than 15 per cent to February 2014, according to Onthehouse data (a property research arm of Residex).

But where does this leave the other capitals? Onthehouse is predicting
2014 will be the year for ‘other capital cities’ as the Sydney market
stabilises.

Consulting analyst for Onthehouse and founder of Residex, John Edwards, says
Sydney’s property market is a leading indicator for the national market.

“The good news for investors is that that while house price growth for
the balance of the year in Sydney will slow from here, other states and capital
cities are probably yet to reach their peak value for this growth period,” he
says.

Edwards predicts Sydney will stabilise because wages haven’t grown at
the same rate as property values.

“There’s a natural limit on the maximum value of an asset at any point
in

time and that’s the value at which the masses deem it to be
unaffordable,” he says.

“At that point, competition for the asset diminishes. In Sydney, the
trend data suggests that house prices are reaching their peak value in dollar terms,
for this period of growth.”

Other factors that might help the Sydney market stabilise include falling
consumer sentiment and rising unemployment fears.

“As consumer sentiment and affordability concerns affect buyers in
Australia, it’s expected that growth in Australia will slow down,” Edwards
adds.

“The Onthehouse data predictions show that Sydney’s annual growth over
the next five years will be four per cent, Melbourne three per cent and Perth three
per cent. Houses are also still expected to outperform units.”

However, buyers’ agent of propertybuyer.com.au Rich Harvey says the
Sydney market is all about supply and demand – and there’s still plenty of
demand.

“It’s simple, interest rates are continuing to fuel demand,” he says.

“There’s still strong investor enquiry and good activity in the
homebuyer market.”

In fact, Harvey helped a friend sell a townhouse in the Sydney suburb of
Dee Why just last week off market. It wasn’t even listed on the internet but competition
was still fierce among investors and homebuyers as it had four bedrooms.

“There were 130 enquiries off market, seven inspections and three solid
offers. They wanted over $800,000 and got $822,000.”

Harvey adds property should be seen as a long-term plan and investors
should try to hold a property for at least five years.

A Pain and
Gain RP Data report has also just been released.

It shows the lowest proportion of loss making re-sales are being
recorded in Sydney (3.6 per cent), Perth (4.3 per cent), Melbourne (six per
cent) and Canberra (7.4 per cent).

Some suburbs of Sydney have performed extremely well.

“There were no loss making re-sales over the quarter in Burwood and
Hunters Hill,” the report says.

Harvey says this report shows Sydney has the least amount of ‘losers’
and the highest number of people who make a profit when they sell, out of any
area in Australia. He believes the fundamentals for Sydney simply stack up.

“This year, we might see a moderation in price increases but there’s
nothing that will lead to a correction or crash,” he says.

“You have to look at the numbers over a 10-year period. A lot of people
are sitting on the sidelines but you should get in when you can afford to.”

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