Sydney’s apartment market remains the strongest major market in Australia in terms of market balance, according to JLL’s Australia Sydney Apartment Market Commentary 3Q17.
JLL expects the Harbour City’s apartment market to continue to moderate, as well as remain relatively resilient to future supply additions – at least for the next few quarters. In addition, tightened finance restrictions on both the demand side and supply side should help bring the market closer to balance.
“As such, we expect price growth to moderate further in 2017, with the potential for moderate price falls in pockets by 2018,” said Vince De Zoysa, senior analyst of residential research, and Leigh Warner, head of residential research at JLL.
The NSW housing market is slowing, mainly due to the Australian Prudential Regulation Authority’s (APRA) new macro-prudential restrictions on investor lending and interest-only loans, particularly at high loan-to-value ratios (LVRs).
When interest rates eventually start rising, the increased mortgage repayments will become a strain on some of the most heavily indebted NSW households. However, much of this debt can be covered by the “underlying housing assets that have continued to increase in value.”
APRA’s macro-prudential measures have dampened the market, with demand further eroding this quarter. “Total housing loan volumes in NSW fell 1.0% in the year to August 2017, compared to a national increase of 0.2%. However, lending restrictions have largely been on investors, and owner-occupiers’ loan volumes grew 4.0% in the year to August 2017,” the co-authors said.
In terms of pricing, the Sydney apartment market remains strong, with prices growing 3.9% in the year to Q3 2017. Only the Gold Coast (5.1%) and Adelaide (4.1%) reported stronger price growth during the same period.
Greater Sydney’s median apartment price is now $717,000, nearly $300,000 more than Brisbane’s median apartment price and $200,000 more than Melbourne’s.
“Sydney-siders continue to demand property at this price, but the moderation in price growth suggests that demand is waning and affordability is being stretched,” the co-authors said.
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