My top 6 Sydney market predictions for 2019
Almost exactly 12 months ago I summarised what many property experts were citing as a year of falling values for property here in Sydney in this article. And it appears that most of them got it right: 2018 indeed was a year of receding growth, with most forecasters accurate with their predictions of falls between 5-8%. Naturally, price value falls varied depending on suburb, dwelling type and price bracket but overall Sydney recorded an average fall of dwelling values just on 8% (Source: Core Logic) After an impressive five-year run of solid price growth, the end of 2018 was when prices actually fell for the first time over a 12 month period since 2012 in Sydney. Not so much a crash as an anticipated soft landing but it’s obvious that the Boom if officially over for this cycle. So what’s ahead for 2019? Here’s my top 6 predictions for the issues I believe are going to impact the market most this year:
- Election outcome: With a new potential Labour government looking likely come May, many investors are spooked about the possible removal of negative gearing taxation breaks (and changes to capital gains) to residential property. If and when policy announcements are made, I believe the market may well experience an investor buying surge prior to implementation, as buyers take advantage of the last opportunity with these tax breaks. What we don’t want is artificial distortion, however, as this will only serve to make buying even more difficult for home buyers.
- Financial Services Royal Commission inquiry: With the inquiry recommendations just through yesterday, the short term ramifications of these aren’t yet clear, but we know that they will affect the lending practices by both banks and brokers, and may serve to restrict would-be borrowers even further. Improving compliance is at the top of the Commission’s long list of concerns when it comes to lending, and depending on the outcome of practices in the industry, it may mean a tougher year for both investors and home owners here. What is clear is that the lending landscape is definitely going to be changing, and buyers need to take this into account when planning to borrow.
- Cash-ready upgrader home buyers to benefit most: In a recent article on this topic I shared my thoughts that this buying group are in the driver’s seat this year, and most likely to benefit from reduced prices, a cooler market and more conditioned vendors in 2019. We’ve definitely helped more home buyers than investors in the last 12 months, which again is representative of the majority of buyers who are in the market out there.
- Return of the first home buyer: Not such a surprise, given that NSW first home buyers have been able to take advantage of stamp duty concessions up to $650,000 for a first home purchase (with a reducing sliding scale to $800,000) since June 2017, but the good news is that since the concessions were first rolled out, Sydney prices have fallen sufficiently for affordability to be improved even further in many first home buyer suburbs. Anecdotally, selling agents are still reporting the sub $700,000 market as quite buoyant in many of the areas we work in for clients, whilst others are seeing slumps. With credit still hard to secure, it’s good news for those FHBs who have done the hard work in saving and capitalising on the current market. After all, on a purchase of $650,000 that represents a real saving of just under $25,000 here in NSW- definitely a concession worth taking advantage of.
- Tenants in the drivers seat: With many off-the-plan developments coming to fruition in the last 12 months, and many more on the horizon for 2019 (count the cranes in our skyline!) there will be a plethora of choice for lucky tenants in those suburbs that are going to be oversupplied with apartments, forcing landlords to revise rents downwards. Head of research at SQM Research, Louis Christopher, has recently predicted that if vacancies continue to rise in January and February, “Darwin, Sydney, Brisbane and Perth will be a tenant’s market in 2019”.
- The demise of the auction: With auction clearance rates here in Sydney faltering and down to the high 40-50% at best during 2018 and early 2019 it seems selling via auction is not only no longer the “easy way to sell” but is also less appealing to those buyers who are willing to adopt a “wait and see” approach, in order to secure a better price. As buyers’ agents, we are noticing a larger willingness by selling agents to advise their vendors against auction in the current environment, as many purchasers consider a failed auction doomsday for the seller. Certainly, auctions will always play a part in Sydney, but we expect their popularity to seriously wane during 2019, whilst the market continues to settle.
Of course the good news is that buyers are definitely now in the drivers seat across many suburbs of Sydney, and those willing to do the research, recognise good value and be prepared to jump in will benefit most. With more room to negotiate, as buyers agents, we have secured some excellent properties during 2018 for our clients and look forward to more of the same during 2019.