Sydney Housing Market
Sydney is one of the hottest markets for homeownership in the world right now. While homes have risen an extremely healthy 19.7 per cent in the US during 2021, home prices are up around 13.2 per cent in the UK.
In fact, Stockhead Magazine, a major investor-related magazine, declares Sydney as being the world’s hottest luxury market in the world, far outstripping cities such as Hong Kong, New York City, Los Angeles, and Paris.
As 2021 heads toward a close, the Sydney real estate market as a whole is expected to have gone up from 2020 at a total of a staggering 27 per cent, making real estate in Sydney indeed, red hot.
Indeed, since January alone, the housing market in Sydney Australia has risen so fast that the price of a median home has risen nearly $300,000 in just 8 months, according to the Urban Developer.
In actuality, single home prices in Sydney have actually gone up 28 per cent, with all other units such as commercial buildings, which saw a financial hit during the COVID-19 pandemic, now recovering quickly, and the total market, including all dwellings other than single-family homes, has gone up a little over 23 per cent.
Why Sydney for real estate?
Sydney, is, first of all, one of the most beautiful cities in the world, with pristine fantastic beaches, loads of great infrastructure and plenty of jobs.
Sydney, despite staying the same size, also grows around 1.37 a year, pushing real estate prices up.
Restrictive development policies
Many real estate investors and developers blame restrictive zoning and developmental limitations by both the Australian government and the heads of the New South Wales government for pushing housing prices up.
They feel that the government emphasizes environmental concerns and limits the density of housing to the needs of the community for cheaper, more affordable housing.
But another pressure is that foreign money keeps coming in, particularly from places such as Hong Kong, and Singapore, and to a lesser extent, China.
Investors in Hong Kong and Singapore, which during COVID had plenty of money to spend but had little opportunity to invest, are rushing into Sydney to invest in real estate, in particular, commercial real estate.
Building lawyers in Sydney stand at the ready to assist in commercial real estate transactions, and the Australian and New South Wales governments have an almost virtually open hand policy towards foreign investment.
Foreign investment in Australia keeps keep Australian dollars propped up, and while there is also a great deal of foreign stock investment in Australia, just as ordinary people in Southeast Asia often buy gold jewellery and keep the jewellery as a form of banking insurance and sell the gold jewellery when times are hard, most investors in Hong Kong and Singapore love having a tangible asset like an office building or industrial park to stock assets which can fluctuate greatly.
And as long as Australian property law continues to favour less dense, environmentally proactive real estate, housing will continue to rise.
Due to a fall?
Just a year or two ago, many “Australian Real Estate Experts” were predicting that home prices would drop around 2 per cent annually over the next three years, before making a gradual return to higher prices.
Although Sydney real estate prices went up a modest 6.9 per cent during 2020 during the height of the Covid-19 pandemic, with many real estate companies being unable to show homes or office buildings except virtually, and many offices sending their workers home to work remotely, life went on.
And now that the government and Australians have decided to live with COVID rather than having the near-impossible goal of eliminating it, Australians are interested in moving on with their lives.
And the pent-up frustrations over COVID, a resignation that at least for the immediate next couple of years there will be no substantial price drop, together with relatively low-interest rates have substantially heated up the real estate market.
One reason why the Sydney real estate market is so hot is that for those with money to invest, there is no place safer, and that has a greater return than Sydney real estate.
The average rate of return in 2020 for stocks in Australia was a respectable 11.49 per cent. However, in the year before, the rate of return was 7.77 per cent.
With Sydney real estate going up 27 per cent in 2021, where can an Australian, or a foreign investor, obtain such a high rate of return?
So great has been the demand for Sydney real estate, that the average home will sit on the market for around 27 days or less before it is sold.
And as buyers, which have a pent-up desire to not only get on with their lives after the COVID scare but also realizing now is the time to buy before prices rise even higher, they are pouncing in droves.
And for good reason
Just this March, a local Sydney television station reported that many first-time homebuyers are be shocked at the number of home buying offers that exceed the asking price. These offers can range from a modest $1,000 over the asking price to up to $40,000 more.
Meanwhile, as a result of low-interest rates and the encouragement of the Australian government, first-time home buyers, in particular, are flooding real estate offices.
Homel sellers are getting double and triple the offers they previously received, and sellers are not stupid. With such a hot real estate market, why should any seller sell their home for less than the asking price?
Thus, the market itself is adding great pressure to Sydney real estate prices.
Most housing experts do predict that into 2020, the high rate of increases in Sydney real estate will drop to a more modest 5 or 6 per cent.
However, as long as Sydney continues to be such an engaging city, and as long as the Australian government and the New South Wales government will not ease up on the use of the property for apartment buildings and townhouses, don’t count on real estate prices dropping in Sydney anytime soon.
