August 2021

This is the 37th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Job vs house flipping

On the tail of the latest news from Core Logic that states that affordability constraints appear to be slowing down the property boom, this month, citing ATO figures, Domain published an interesting article that discussed how some homes have effectively earned more than highly paid psychiatrists, CEOs and surgeons in the last quarter. The Sydney median house price spiked to $1.4million over the period, which breaks down to a greater jump than some of the top paid professions earned in that time. If this were to continue, perhaps more people would be quitting their jobs to start house flipping!

It’s not just houses either. In another article, Domain discusses how ‘pockets’ of the unit market are starting to get dragged along by the house market’s upward spiral towards 2017’s record highs. Although, according to their own information, nearly half of Sydney’s unit market is still trending downwards to some extent, but the areas where it is really taking off (Inner West, Eastern Suburbs and most of the northern suburbs including the Central Coast), it is really taking off: Quarterly rises in unit prices of 5.4% in the Inner west, to 13.9% on the Northern Beaches.

ANZ are expecting house prices to gain another 20% nationally this year, with a 23% rise in both Sydney and Hobart. NAB is a little more conservative, predicting 18.5% in 2021, and a much reduced 3.6% in 2022. According to the article, Sydney prices continue to climb despite the lockdown, and now into Spring and the possibility of freedom over the next month or so, likely will see the trend continue. In fact, CBA apparently suggests that housing market momentum would only be really slowed by a rise in interest rates.

House flipping… Russian style

An alternate view on property values

This suggestion is also expanded on by the ABC’s finance and stock market commentator Alan Kohler, who disagrees that supply and demand are the primary forces affecting property market pricing (for example, see this article on Real, and states that demand is traditionally driven largely by immigration – which has all but collapsed during the pandemic. Kohler makes a strong if non-nuanced argument that the current all time low interest rates and fixed rate mortgages have created a ‘once in a lifetime opportunity’ where, valued by the repayments alone, effectively mean buying a home has ‘never been cheaper’. Not to be cynical, but does this mean the banks have inadvertently found a great way to capitalise on the current lending environment?

So what exactly do you actually get for your money these days, then? Depending on where you go, not so much. Basically, spending several million in Sydney’s Eastern suburbs does not guarantee you’ll get beyond the ‘fixer upper’ range of offerings, nor offer assurance of even off-street parking. This article gives examples of a Bellevue Hill original fibro 3 bedroom home (with a pool!) that went for $6.4 million. If you spent $3 million less in Sydney’s South West, you could buy a palace which is a bit more like what you’d expect for the price tag. That is, 7 bedroom, 5 bathrooms, massive estate (and pool, of course).

Supply & demand, or low interest rates?

Bank of Mum and Dad

More people are turning to the bank of mum and dad (BMD), according to this article. The situation is now at the point where ‘children’ (of any age) are now seeking assistance from BMD for their second property. This really shows the level of inequality between the ‘haves’ (those who own property) and the have-nots (those who don’t). To put it in context, the article notes that property prices have ballooned 11x higher than wages since 1989. Apparently, BMD is now the 9th largest lender in the country, supporting around $35 billion worth of loans / gifts.