All Signs Pointing Upwards for Sydney Property

Sydney property has proven itself as a heavyweight of the national market. The consistently rising prices and strong investment activity have been the envy of other cities, and the level of demand for homes in the Harbour City almost defies belief. According to the latest House Price Report from Domain, house prices in the New South Wales capital have increased by 3.6 per cent over the March quarter and are 16 per cent higher than in the same period in 2014. But for homeowners and those looking to take out a home loan, this talk begs one question: What’s driving the rapid value growth?

A strong economy

There is a whole range of interconnected factors that have created the current boom-time conditions, something that Domain Group Senior Economist Andrew Wilson has attempted to unravel. In the group’s State of the Market report for 2015, Mr Wilson outlined that while other cities have lagged behind in terms of economic performance, Sydney has stood out.

In fact, the Harbour City has been a key driver in national economic performance. According to research from SGS Economics & Planning, the city contributed 37.9 per cent of all GDP growth in 2013-14. It’s this exceptional level of performance that’s keeping the market ticking over, and could continue to do so.

“Local economic activity generally deteriorated through 2014 with the national economy characterised by rising, decade-high unemployment and low and falling wages and profit growth,” Mr Wilson said.

“The Sydney economy, however, remained a robust capital city leader – a key factor in sustaining high levels of housing market activity.”

In reality, Sydney’s property market is a multi-layered equation. While strong economic growth has helped maintain house prices, the strength of the property market has equally been an important pillar of support for the state’s fiscal position.

Interest rates

Mr Wilson also noted that the historically low interest rates are proving an irresistible drawcard for investors, which is underpinning strong value growth. Investment activity has been surging across the country. According to figures from CoreLogic RP Data, the value of lending to investors grew 9.9 per cent nationwide over the year to February – and it’s little wonder why.

Further CoreLogic research indicated that households were paying around $27,200 each year on the previous variable rate of 6.8 per cent. Based on the current average variable rate of 4.9 per cent recorded in March for a $400,000 home loan, households could be saving approximately $7,800 a year in interest repayments – that’s $150 per week extra in your savings account.

“Lower interest rates will also activate investors who will have increased capacity to borrow and an enhanced “bricks and mortar” comparison with falling term deposit rates,” Mr Wilson said.

The combination of elements involved in Sydney’s property market are unique – and the city is showing little sign of slowing down. If you’re on the look out for a home in the New South Wales capital, be sure to get in touch with our home loan professionals at Police Bank. We can help you figure out a plan of action to make your dream home a certain reality.