May 2021

This is the 34rd in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Yes, it’s a boom

Core Logic reports that the current housing boom has increased home values Australia wide by 2.2% in May alone. This totals almost a 7% rise from March to May (9.3% rise in values in Sydney over the same period). The article also reports that of the 334 sub-regions analysed, 97% showed increases in values, which is extraordinary.

Unsurprisingly, The Real Estate Conversation reports that housing affordability has worsened Australia wide slightly in the March quarter. Housing affordability is measured by the average proportion of a person’s income that is required to meet loan requirements. Last year in the March quarter, the proportion had fallen by 0.5% (which increased affordability). This year it has risen overall by 0.1%.

Incredibly, New South Wales and South Australia affordability is reported as improving slightly, but all other states and territories fell. For more information, including the rates of first home buyers taking out loans, have a look at the article.

Despite the rising values and decreasing affordability, Domain discusses a S&P report which states that less mortgages are falling into arrears in March, than in the same month last year. In 2021 this percentage is reported as 0.94%, compared to 1.03% in 2020. The key takeaways of this are that low interest rates and Government stimuli are taking the heat out of many mortgagee repayments, but he downside to these benefits of course has been the commensurate rise in house prices as borrowers always seek to stretch themselves to the limit of what they can afford. It’s probably just as well wages have been flat for so long otherwise who knows what house prices would be doing.

The Endless Sprawl

Giving some insight into answering the question “how much further can Sydney stretch” the Sydney Morning Herald discusses NSW Department of Planning estimates of the 130 000 to 170 000 new homes likely to be built over the next 4 years. As you can see from the chart (the original is interactive), red areas show where the highest numbers of applications are expected. All areas have three possible outcomes of high, low, and central growth potential outcomes. The highest of the high, Parramatta, Marsden Park, Schofields and Rouse Hill all have potential high new developments in excess of 4000 each. Of particular interest is that in the west, Katoomba and Blackheath are now apparently part of the wider Sydney area, as is Bargo to the south, which is practically halfway between The Sydney CBD and Goulburn, and Glenorie in the north, which is halfway to Gosford.

Reality check on home values

Although Sydney and Australia seem to be in the throes of a huge increase in housing values, John McGrath writes in the Real Estate Conversation that our rises in home values are peanuts compared to many other cities including Auckland (18+%), and Berlin (11+%). About on par with us is Luxembourg City, New York, Stockholm, Vienna, Toronto and Seoul, all ranging in order from 10.6% down to 9.1%. the prestige sector has also moved forward in leaps and bounds with international residents buying ‘co-primary’ residences in the Carribean, the Alps and other popular destinations.

Mcgrath notes that some of this can be attributed to the tsunami of remote working caused by COVID, and also the historically low interest rates around the world.

Finally, Dan Argent offers some sage advice on how – as an agent – to destroy your career during a housing boom. In a nutshell: In the end it’s all about relationships, and in a booming period the opportunity exists to annoy more buyers en masse than normally. Argent shares a couple of great anecdotes based on his experiences.