As interest rates rise, the Sydney property market remains resilient with investors and the luxury property market holding strong.
As Australian homebuyers face another interest rate rise, industry experts say that this won’t affect housing prices in the Sydney property market which are being driven upwards by a lack of supply.
The Federal Government’s National Housing Supply Council released their second State of Supply Report in April. In its findings, the council estimated there is a cumulative undersupply of 178,400 dwellings.
The greatest undersupply in dwellings was found to be within New South Wales (57,600) and Queensland (56,100). The states with the smallest estimated shortfall in housing were found to be: South Australia (100) and Tasmania (1,000).
The National Housing Supply Council estimates that by 2014 the gap between supply and demand will increase to 308,000 dwellings nationally. This is well short of the estimated figures the Sydney Metropolitan Strategy say are needed for Sydney to cater for an extra 1.12 million people in the next 25 years.
However, Australian Bureau of Statistics March 2010 figures released in early May revealed that, after two months of decline, private sector home approvals for new dwellings are now in the black, with a 14 per cent seasonally adjusted increase in March.
The Urban Taskforce’s chief executive, Aaron Gadiel, said the March result more than cancels out the 9.5 per cent decline in private sector approvals in January and February and is the best March result for these approvals since 2004.
NSW saw a seasonally adjusted 62 per cent lift in private sector home approvals in the Sydney property market – more than making up for the 30 per cent decline in home approvals recorded since October 2009.
RPData reported that despite a drop by 3.4 percent over the month in seasonally adjusted terms in the value of housing loan commitments taken out in February for both existing and new homes, the value of investor finance has remained much more resilient in the Sydney property market. The decrease is due partly to a decrease in first home buyers.
Investors not daunted by the rising interest rates and the mounting property prices in Sydney account for just over 31 percent of the value of all housing loans, up from a recent proportional low of just 24 percent early last year. The value of investor loan commitments fell by just 1.1 percent; the first month-on-month fall since interest rates started to rise.
RPData say that investors are likely to remain one of the most active market segments going forward as they are much less sensitive to interest rate rises and affordability issues.
It will be interesting to see how the changes to foreign investment laws announced in April by the Federal Government will impact the real estate landscape.
Temporary residents buying property in Australia will now need to be screened and get permission from the Foreign Investment Review Board to buy a property. Foreign investors will also have to sell their property when they leave Australia.
The move is a reversal of the relaxation of foreign ownership rules 18 months ago. The tightening of foreign investment rules is a move welcomed by industry experts who have long believed that foreign investors have been a strong factor in driving prices up in the Sydney property market and pushing first home buyers out of the market.
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