No property bubble in Sydney market, says Charter

PETALING JAYA (July 7): Sydney’s property boom is supported by solid fundamentals, rather than a bubble situation, according to Australian property advisory firm Charter Keck Cramer (Charter).

“The view from Charter is that Sydney is not in a bubble situation, but rather a ‘frothy’ boom underpinned by solid fundamentals. Conditions should gradually moderate through 2016 and 2017 without the feared price crash given Australia’s benign economic conditions will reduce the likelihood of a rapid return to higher interest rates,” said Charter’s strategic research principal Toby Adams.

Charter’s findings is based on its view that the city’s apartment market is currently in the early stages of the supply cycle, which will be underpinned over a longer period by the shortage of available development sites and difficulties in securing development approval for project scale.

Sydney has completed almost 25,000 dwellings last year—the highest number achieved since 2000, with approximately 14,000 of these being apartments, according to Charter’s proprietary apartment database.

The city’s median house price has rose to A$914,000 (RM2.6 million) at an annual growth rate of 15%, on historically low interest rates, strong population growth, renewed business and consumer confidence and unprecedented levels of investor activity.

The greenfield market has experienced the most dramatic change, with the metro median lot price now at A$395,000 and an annual growth of 12%.

Adams noted that while investors and owner-occupiers are very active in the current market, first-time home buyers are increasingly missing out.

“First-time home buyers now account for less than 15% of market activity compared to the long-term average of 25%,” he said. “Foreign capital is also being invested in apartment development projects, with an increasing number of major entities entering the Sydney market and achieving success.”