Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Sydney

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The classic art-deco Dover heights residence of locksmith Jason Carr and Haley Carr goes to auction on March 2 with $5 million plus hopes.
The 1937 Kippara Road property was the reportedly the Chinese embassy until World War II. In 1941, it was sold to pawnbroker Neville Grace and his wife Hilda, who resided in the property until her death in 1982.
It last traded in 2001 for $1.69 million.
Around five years ago another level was added by architect Michael Grimshaw very much in keeping with its 1930s origin.
<a href="https://www.domain.com.au/property/for-sale/house/nsw/dover-heights/?adid=2011673197" target="_blank">The 955 square metre property</a> with pool has been listed through Sydney Sotheby's International agent Michael Pallier.
It has ocean and Harbour Bridge views.
Title Tattle did the title searches that showed it had been bought by Rose Bay merchant Tsu-Yau Lin in 1937 at 550 pounds selling in 1941 after completion at 3600 pounds.
Records show a vessel, Burwah was sold by Howard Smith Co. Limited, of Melbourne, to Tsu-Yau Lin, of China in 1947, perhaps a clue as to his business interests.
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jchancellor-FAypfDUnLy

Former art deco 1930s Chinese embassy listed at Dover Heights

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The cheapest weekend sale at Sydney auction was $380,000 for a Merrylands apartment.
The 7/23 St. Ann Street, Merrylands flat was leased for $360 per week for the past year or so.
The vendor was moving overseas, the Century 21 listing agent Nick Papas said. It sold prior to auction to a mum and dad investor.
The first floor, two bedroom, one bathroom apartment was marketed as a property "ideal for the first home buyer or smart investor". Century 21 South West Fairfield secured the sale with Papas telling Property Observer he thought the 4.9% yield was pretty good for the market.
There was an 83% weekend clearance rate according to Australian Property Monitors.
Sydney's north west reported a perfect score at the weekend with a 100 percent clearance rate, APM senior economist Dr Andrew Wilson said.
 Next best was the neighbouring upper north shore with 92 percent, followed by the inner west with 91.4 percent and the highest sales at 53. 
The city and east recorded a clearance rate of 89.4 percent with the lower north 86 percent, the northern beaches 85 percent, Canterbury Bankstown 80 percent, the south 78.4 percent, the west 69.4 percent, the south west 67.9 percent and the central coast 50 percent. 
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Merrylands Sydney's cheapest sells on 4.9% yield

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GUEST OBSERVATION
With all of the growth that property in Sydney experienced last year, you would expect there to be a correction over the coming year. A halt, a significant slowdown, anything to balance out the growth that saw the New South Wales capital experience value growth far and away beyond any other capital city in the country.
However, it seem there may be more to come. For anyone who has bought investment property in Sydney or is thinking of doing so, the latest releases from several experts indicate that capital gains can still be made in droves in the Harbour City.
Boys cry wolf while Sydney carries on 
In the 27 January SQM Research newsletter from sterling commentator Louis Christopher, he put paid to those decrying the Sydney market and anticipating its failure.
"Sooner or later they will be right but right now, a slowdown currently happening in Sydney? Hardly," he wrote. He says he spent the entire Christmas period meeting and speaking with agents and industry experts, all of whom had a busy holiday period for property.
Christopher does not see property growth dropping below 8% this year, especially if the interest rates fall. And given the Real Estate Institute of Australia's enthusiasm for a cash rate cut from the RBA because of the Consumer Price Index, this may just happen.
However, Christopher doesn't expect heavy growth to go on forever. While the predicted downturn hasn't happened yet, it may still happen in the coming years. This suggests that the near future could still be a good time to engage a buyers' agent and make an investment in Sydney property, while there are still gains to be made.
Brisbane behind, but Sydney's growth unbeatable
According to the Domain Group Home Price Report for the December quarter, Sydney's median house price rose 4.1%, while the median unit price rose 2.9%. This brought the final annual growth figures for homes and apartments to 14.1 and 10.4% respectively, head and shoulders above the competition.
Andrew Wilson, senior economist with Domain also noted that Sydney shows no signs of stopping this growth. Wilson is forecasting growth of between 7% to 10% for 2015.  Sydney’s median house price is now $873,000 and median apartment price $597,000. 
Not all suburbs will experience significant growth.  While low interest rates continue to support strong borrowing activity, investors and home buyers need to be careful to look at the long term value of the property they are buying.  Look for suburbs where there are good transport options, excellent schools, close to shops and where there is limited potential for over-development.  Many suburbs in Sydney could be rezoned for higher density so you don’t want to buy in areas where there is any possibility of over-supply.
While increasing prices means great returns on dwelling investment, the flipside is that buying a property becomes more expensive. 
Rich Harvey is an economist, investor and the CEO and founder of buyer's agency <a href="https://www.propertybuyer.com.au%20" target="_blank">Propertybuyer</a>.
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rharvey-JMQneTqnM9

Is Sydney really still going strong?

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The ABS released its <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/5671.0Main+Features1Dec%202014?OpenDocument" target="_blank" style="font-size: 12.1599998474121px; line-height: 1.3em;">Lending Finance</a> data for the month of December, and the figures were a neat microcosm of the challenges facing the Reserve Bank of Australia. 
Commercial finance - a data series of which property investor loans are a subset - fell by another 2.9% in December and the trend has now moved beyond its November peak, with the trend in total lending looking increasingly weak.
Yet as we saw <a href="https://petewargent.blogspot.com.au/2015/02/housing-finance-straps-on-jet-pack" target="_blank">earlier in the week</a>, we know that owner-occupier housing lending had begun to pick up again, even prior to the February rate cut.
<img src="https://3.bp.blogspot.com/-xTRQNODakoc/VN3BJcOB5YI/AAAAAAAATHo/ZRrhvaa5jkQ/s1600/investor1.jpg">
And it was the dramatic pre-rate cut <a href="https://petewargent.blogspot.com.au/2015/02/housing-finance-straps-on-jet-pack" target="_blank">6% surge</a> in investor lending which really caught the eye, with investor lending surging by a massive 24.6% higher on a rolling annual basis over the past 12 months.
<img src="https://4.bp.blogspot.com/-e2ZnpHK7Kfc/VNrNgQSSKgI/AAAAAAAATDQ/Ewma_NojTxo/s640/HF2.jpg">
The detailed investment lending figures are hidden within the data above. Let's take a look to see where property investors are buying.
Sydney goes parabolic The Lending Finance data tells us where the investment loans are being written - in a word, Sydney.
And how! An extraordinary $5.7 billion of New South Wales lending in December was yet another all-time record month of lending, easily eclipsing the record $5.26 billion state record set in November (which itself beat records set in September and October respectively). This comes off the back of New South Wales owner-occupier commitments which ripped through a state <a href="https://petewargent.blogspot.com.au/2015/02/housing-finance-straps-on-jet-pack" target="_blank">record $6 billion</a> in the same month.
The accelerating rate of investor growth is the really astonishing point of note - another 8% surge even before interest rates were cut again suggests that the annualised lending volumes for New South Wales could now be anything...perhaps heading towards $65 billion or even $70 billion plus.
This is both extraordinary and unprecedented. Throw in the increasing weight of foreign capital as the Australian dollar depreciates and the inner Sydney housing market could be in for a blockbuster 15 months.
<img src="https://2.bp.blogspot.com/-WdOgEKF7_Hc/VN3BHX-6X_I/AAAAAAAATHs/ctzwK3pzKDs/s1600/Investor%2Bloans.jpg">
While this has already led to a predictable bout of "property bubble" hysteria, it is worth noting here that there has been no such surge in investor lending in South Australia (Louis Christopher of SQM Research described the Adelaide market as "dead as a door nail" - a touch harsh perhaps, but there's certainly no boom apparent), the Northern Territory, Tasmania or the Australian Capital Territory where prices are falling. Meanwhile the burst of activity in Western Australia is now clearly tapering off.
The <a href="https://petewargent.blogspot.com.au/2015/02/housing-finance-straps-on-jet-pack" target="_blank">housing finance</a> and lending finance data series do suggest that the Melbourne market appears to be having something of a second wind - but high volumes of construction and a material stock overhang should help act to keep a lid on dwelling price growth in the Victorian capital henceforth.
Sydney to boom - all bets are off, but for how long?
What is unfolding in Sydney is now a law unto itself - albeit not surprising to long-term readers of this blog - due to inner Sydney's inherent undersupply of dwellings which has allowed rents to rise in concert with prices, a dynamic which simply wouldn't have existed without an undersupply. Preliminary auction clearance rates on Saturday of a massive 83.3% reported suggest that a red hot Sydney market has kicked off once again in 2015. The monthly level of investor lending in this seasonal series is now incredibly more than 2.5 times the volumes we were seeing only 3 years ago, and still rising fast.
<img src="https://3.bp.blogspot.com/-kS-MNC7RSXA/VN3BHggxj9I/AAAAAAAATHY/ASCoIH0viGs/s1600/Investorsloans2.jpg"> It is imperative that those buying in the harbour city have a clear understanding of which suburbs have already blown off (cf. the inner west in particular) and which have yet to kick forward so materially in this cycle.
Buyers should also consider forthcoming transport and infrastructure links which will be key market drivers over the next five years.
Market defies gloomers
Not only have prices not crashed, activity in the market appears to be accelerating - how did Sydney's housing bears get it so unfathomably wrong?
On balance, the main reason is likely that they neglected to note the chronic undersupply of dwellings in inner Sydney caused by the best part of a decade of under-building, which only now is being addressed by <a href="https://petewargent.blogspot.com.au/2015/01/building-approvals-hit-record-high-we" target="_blank">record high unit approvals</a>.
Even in 2014 median apartment rents continued to increase by another 3.85 to 4.3% depending on your data source.
The median unit price in Sydney at the end of Q4 2014 was around $606,500, with median apartment rents of around $540/week implying gross yields of approximately 4.6%.
Vacancy rates in inner Sydney are <a href="https://www.reinsw.com.au/imis15_prod/web/Posts/Media_Releases/201412/MR_Sydney_residential_vacancy_rates_remain_low_APRA_findings_unfounded.aspx" target="_blank">still only around 1.5%</a> (despite the onset of an apartment construction boom with <a href="https://petewargent.blogspot.com.au/2015/01/record-high-for-dwelling-commencements" target="_blank">all-time record home starts</a>) which is a veritable world away from the elevated <a href="https://petewargent.blogspot.com.au/2014/04/vacancy-rates-tighten-further" target="_blank">vacancy rates which helped to pull up stumps on the preceding boom</a> in 2004.
Article continues on the next page. Please click below.
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How much longer will this boom run?
One thing that we can now say with 100% certainty is that high interest rates will not be responsible for calling time on this property boom.
Just as in 2003/4 this market boom may simply have to die of "old age" when gross yields fall to unacceptably low levels, perhaps with vacancy rates rising significantly helping to drag down rents.
How low investors will be prepared to bid gross yields is unknown for we are now into uncharted territory, both in terms of the volume of loan approvals and in terms of mortgage rates.
By way of comparison the cash rate in December 2003 was hiked by 25bps to 5.25% - today the cash rate is just 2.25% with a 71% chance of it being cut by 25bps to only 2% as soon as 3 March.
Futures markets see a 2% cash rate this calendar year as getting close to a stone dead certainty.
<img src="https://1.bp.blogspot.com/-qWN-NRzeFA8/VN8Sx8UlcsI/AAAAAAAATIg/1jIH5gy08Xc/s1600/RBA1111.jpg"> 
 Consider a stylised example within which median apartment rents were to increase by another ~4% over the next five quarters to $560 per week. If this seemingly endless supply of investors was prepared to bid gross yields 0.5% lower - broadly reflecting expected shifts in the cost of borrowing - all the way down to 4.1%, then this simple model implies that the median apartment price would soar by another 17% or more than $100,000 to above $700,000 - which is a frankly terrifying prospect for first homebuyers.  Could this happen? With five year fixed rate mortgages available from under 4.7%, three year fixed rates from under 4.3% and 1 year fixed rates even advertised with a 3 handle, it is far from inconceivable, particularly with February's rate cut already adding further fuel to the fire. Whether or not this plays out will now be decided by how quickly apartment completions come online and whether APRA intervenes directly in the mortgage lending market.
Queensland 
Investor activity is also robust in Queensland, although commentators will in all likelihood be wrong-footed by this year's data for the Sunshine State.
While property viewings in the inner suburbs of Brisbane are increasingly crawling with interested buyers, this will be offset by a number of regions within which property markets are in a significant decline, particularly certain mining towns and regions impacted by the collapse in coal prices.
On the ground we are clearly seeing more and more evidence of interstate investor activity and buyers agents at work in inner Brisbane suburbs (as well as hearing of the same from agents with raised eyebrows).
<img src="https://1.bp.blogspot.com/-xwyjXfsgXnE/VN3BHj6frAI/AAAAAAAATHc/-E49cnxE3Dc/s1600/Investors3.jpg">
Queensland - affordable markets
While on the face of it the level of housing affordability is what causes our housing markets to ebb and flow, it's as likely to be demographic shifts, labour force trends, dwelling supply, the cost of borrowing and the availability of credit in Australia which drives property market movements. 
The unemployment rate has been at a historically low level but has been rising steadily through 2013 and 2014.
The issue of affordability is an ongoing one, and being an emotive issue, the dynamics of how housing markets actually work in practice are often not considered.
The great paradox of today's rising asset prices is that the prevailing low interest rate environment has improved affordability considerably for existing homeowners but made bridging the deposit gap correspondingly more challenging for first-time buyers as market entry prices rise.
Older hom eowners often come to me expressing wide-eyed surprise at the level of their surplus income, the driver of which has clearly been the structural shift to low inflation and lower interest rates over the past 25 years. 
Article continues on the next page. Please click below. 
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Multiples of income The way in which housing markets from different countries are compared to each other is most often by taking the median price of a house and dividing it by an average measure of household income to produce a multiple. Looking at how long it would take to pay off an average house with an average income is a handy shortcut measure of housing affordability and a very easy means of comparison.
However this is not how capital city housing markets work in reality, since it flatly ignores the role of the cost of debt and the differing financial situations and stages of life that buyers and owners of property are in.
This widely favoured methodology fails to consider mortgage repayments - a housing market where prices are a lower multiple of incomes yet has mortgage rates of above 15% may still not necessarily be an affordable market.
In other words, the multiple of incomes method works on the flawed assumption that everyone is a first home buyer with a 80-100% loan.
There are essentially four different types of buyer, and issues of affordability affect each of them differently.
1 - No finance
The percentages fluctuate each year, by city, by state and by region, but between a quarter and a third of properties tend to be bought with no financing.
How so? Well, there are some lucky folk whose parents buy their homes for them, but most often this happens due to the sale of an existing home. Empty-nesters and downsizers form part of this phenomenon.
Other older buyers who are mortgage free opt to move to a similarly-sized home and thus require no debt financing.
The Reserve Bank's financial aggregates <a href="https://petewargent.blogspot.com.au/2015/01/strongest-credit-growth-since-2009" target="_blank">show that</a> Australia has approaching $1.5 trillion of outstanding housing credit, with the split allocated as 34.3% investors and 65.7% owner-occupiers. <img src="https://4.bp.blogspot.com/-hqJMoJFPS8U/VMtgAm0WtPI/AAAAAAAASw8/MInuRZXGuJE/s640/RBA2.jpg"> Yet even the sum total of all forms of household debt is comfortably dwarfed by the huge value of Australia's 9,448,300 dwellings <a href="https://petewargent.blogspot.com.au/2015/02/sydney-and-brisbane-lead-dwelling-price" target="_blank">as estimated by the</a><a href="https://petewargent.blogspot.com.au/2015/02/sydney-and-brisbane-lead-dwelling-price" target="_blank"> Australian Bureau of Statistics</a> at a massive $5.4 trillion.
Cash buyers are affected little by rising or falling interest rates, and often they remain unaffected by the base value of housing, since the asset which they are selling may rise in tandem with the asset they opt to buy.
2 - Investors
As our capital city housing markets mature and the population expands largely through immigration, it is expected that the number of properties owned by investors will also increase.
Australian Finance Group (AFG) consistently recorded that around 40% of loans written in Queensland in 2014 were for investors. In cities such as Sydney around half of loans presently written are investment loans.
Australia-wide one of the gauges or indicators over time of how much property is bought by investors is the rate of home ownership, which seems likely to slide in the decades ahead.
With some investors choosing to own multiple properties, investors tend to comprise a significant%age of capital city property purchases.
Affordability is not really an issue for most investors in the prevailing low interest rate environment, since rental income pays the bulk (if not all) of the mortgage, while there are tax deductions available for on-paper losses.
In Brisbane gross yields on apartments can be as high as 5.5%, although in some suburbs vacancy rates are clearly significant and unit rents may well ease in time as supply comes online.
Investors generally elect to buy property at times when rental yields are acceptable as compared to other available investments and in regions where they expect to see capital growth. Most property investors are looking for locations where the population is expected to grow over time and therefore they have been very heavily focused on capital cities such as the inner suburbs of Sydney, Melbourne, and next up, Brisbane. 
3 - Existing mortgagors
Again, the percentages fluctuate each year and by state, but around a third of the market of property buyers tend to be existing mortgagors who have equity in their home.
So the issue for these buyers of affordability is largely governed by interest rates and the price gap between the property they own and the one which they want to own.
Note therefore, that housing affordability for these buyers is correspondingly unrelated to the base value of their existing property, and is instead much driven by their own aspirations.
4 - First home buyers
The remaining 14% or so of property buyers are first home buyers according to the ABS (AFG has still not amended its reporting mechanisms which are recording first home buyers in Queensland at a nonsensical 3.7% of loans written), which is the one sector of the market for whom repayments versus household income is a genuinely important measure.
For this sector of the market the challenges to be overcome include the deposit gap and whether mortgage repayments can be well covered in the event of future interest rate hikes.
The first home buyer demographic which has access to a deposit and mortgage finance is driven by another equation: the cost of renting versus the expected mortgage repayments - which have plummeted - if a home is purchased.
The Wrap
The statistics show that housing affordability in Brisbane is relatively good for the majority of buyers since mortgage rates are now at previously unthinkably cheap levels.
In inflation-adjusted terms Brisbane prices are 13% below their March 2008 peak, so it would be no surprise in the current low interest rate environment to see median dwelling prices rise by 15 to 20% over the next three years.
That said, there are a great many new apartment developments coming online in the suburbs discussed on my blog previously, so price growth in generic unit stock is likely to be weaker. 
How long Sydney's boom will run for is anybody's guess, but it seems that only regulatory intervention will deter investors now. 
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.
His book '<a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>' is out now.
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Sydney investor activity turning parabolic - how long will the boom times run?

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Marrickville, Gorokan and Toukley are among the busiest of Sydney's cheapest suburbs, according to CoreLogic RP Data.
For houses, Marsden Park is the cheapest Sydney suburb, with a median price of $119,310. However, the suburb only saw seven homes sold in the past year. Far busier was Gorokan, with 241 houses sold in 2014. With a median house price of $306,991, it is the fourth cheapest suburb in Sydney.
<a href="https://www.realestate.com.au/property-house-nsw-gorokan-118545727" target="_blank">3 Bertha Street in Gorokan</a> sold for $310,000 last week.
<img src="/images/2015/02/09/1%20gorokan.jpg" alt="">
Above: 3 Bertha Street
The two bedroom house on a 550 square metre plot came with development approval for a duplex. The vendors paid $125,000 less when they purchased the home in 2007 for $185,000.
<a href="https://www.realestate.com.au/property-house-nsw-gorokan-118696967" target="_blank">56 Gilbert Avenue</a>, which was marketed towards first home buyers, sold for $300,000 in mid-January (pictured below).
<img src="/images/2015/02/09/2%20gorokan.jpg" alt="">
Above: 56 Gilbert Avenue
The three bedroom villa has been recently renovated. The vendors, who paid $225,000 for the home in 2009, used it as an investment property. It was advertised to rent at $315 per week in 2013.
Marrickville has the fifth-lowest median price of any suburb within 10 kilometres of the Sydney CBD. With 213 homes sold over the last year, it is also the busiest of the 10 cheapest Sydney inner-city suburbs (see table below).
HOUSES: Greater Sydney
<img src="/images/2015/01/22/rp-jan-22-one.jpg" alt="">
<img src="/images/2015/01/22/rp-jan-22-two.jpg" alt="">
HOUSES: &lt;10km from CBD
<img src="/images/2015/01/22/rp-jan-22-four.jpg" alt="">
Source: CoreLogic RP Data.
CoreLogic RP Data recorded Marrickville's 2014 median value as $892,297 for 2014.
<a href="https://www.realestate.com.au/property-house-nsw-marrickville-118559543" target="_blank">167 Sydenham Road in Marrickville</a> sold for $890,000 last week. The full brick, three bedroom house had been held by the vendors for almost 28 years – they paid $74,500 in 1987.
<img src="/images/2015/02/09/3%20marrickville.jpg" alt="">
Above: 167 Sydenham Road
In November last year, buyers paid $900,000 for a corner block two bedroom brick home at <a href="https://www.realestate.com.au/property-house-nsw-marrickville-118351459" target="_blank" style="line-height: 1.3em;">39 Gladstone Street in Marrickville.</a> The house was purchased by the vendors for $615,000 in 2008, with the home appreciating 46% in six years. 
<img src="/images/2015/02/09/4%20marrickville.jpg" alt="">
Above: 39 Gladstone Street
For units, Toukley in the Central Coast was one of the busiest of the cheaper outer suburbs. Toukley had a median of $265,887, making it the sixth cheapest Sydney suburb for units. This one sold for $259,000 in September.
<img src="/images/2015/02/13/toukley%20feb%2013%20one.jpg" alt="">
<a href="https://www.realestate.com.au/property-unit-nsw-toukley-117752435" target="_blank">2/39 Victoria Avenue in Toukley</a> (pictured above) is a single storey two bedroom unit with an enclosed sun room and a courtyard.
UNITS: Greater Sydney
<img src="/images/2015/01/22/rp-jan-22-one.jpg" alt="">
<img src="/images/2015/01/22/rp-jan-22-three.jpg" alt="">
UNITS: Under 10 kilometres from the CBD 
<img src="/images/2015/01/22/rp-jan-22-five.jpg" alt="">
For inner city units, the busiest of the 10 cheapest suburbs was again Marrickville, with 268 units sold last year. The suburb is the 10th cheapest in the Sydney inner-city for units, with a median sale price of $508,813.
For that price, a buyer might get an apartment like one at <a href="https://www.realestate.com.au/property-apartment-nsw-marrickville-118620451" target="_blank">9 George Street</a> (pictured below), which sold for $509,000 last month.
<img src="/images/2015/02/13/marrickville%20feb%2013%20one.jpg" alt="">
The one bedroom offering was one of multiple renovated apartments at the 9 George Street complex offered.
<a href="https://www.realestate.com.au/property-apartment-nsw-marrickville-117382003" target="_blank">14/416 Marrickville Road</a> (pictured below) was another one bedroom unit that sold around the median price, for $507,500.
<img src="/images/2015/02/13/marrickville-feb-13-two.jpg" alt="">
The apartment at the rear of its block last traded at $196,000 in 2005.
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The busiest of Sydney's affordable suburbs: CoreLogic

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Sydney's prices are set to fall when interest rates rise again, predicts HSBC Australia chief economist Paul Bloxham.
HSBC predicts that Sydney's house prices could drop by 2% in 2016 after its third consecutive strong year forecast for 2015. It would happen after the official cash rate moved from a forecast 2% this year to an average 2.75% in 2016.
He also warns that Sydney's market is "at risk of a bubble", saying the current level of growth in Sydney home prices is unsustainable and "likely to be met with declines in future years, when interest rates do begin to rise".
Click on charts to open in new window.
<a href="/images/2015/02/10/Picture%2036.png" target="_blank"><img src="/images/2015/02/10/Picture%2036.png" alt=""></a>
"A signal of the growing risk of over-inflation in the Sydney market is the high level of investor demand," Bloxham explains.
"Housing loan approvals for investors currently account for a record high share of new loan approvals in New South Wales." (See chart below).
<a href="/images/2015/02/10/Picture%2037.png" target="_blank"><img src="/images/2015/02/10/Picture%2037.png" alt=""></a>
"The high involvement of investors suggests that there is a speculative dynamic in the Sydney market that may be worrisome," said Bloxham.
"Investors are typically seeking capital gains, rather than rental yield, as Australia's tax system favours capital gains.
"Investors themselves tend to be lower risk borrowers, as they typically have equity in another owner-occupied property and have lower loan-to-valuation ratios than first home buyers.
"In this way, it is not clear that investor involvement is leading to increased financial system risk. However, it does seem likely that increased investor activity is driving housing prices to rise faster than fundamental factors suggest they should in the Sydney market."
HSBC predicts that Sydney's house prices could drop by  2% in 2016 after 9% to 10% growth in 2015, its third strong consecutive year.
<img src="/images/2015/02/10/forecasts.jpg" alt="">
Note: HSBC's forecasts assume their cash rate predictions for 2016.
In the latest HSBC Downunder Digest, which is headlined "Australia's housing boom may get bubbly", Bloxham calls interest rates "the single most important determinant of housing price dynamics in Australia".
However, he notes that "monetary policy is being pushed to its extremes" with the latest rate cut to a record low 2.25% by the Reserve Bank, with the market anticipating another rate cut.
<a href="/images/2015/02/10/Picture%2031.png" target="_blank"><img src="/images/2015/02/10/Picture%2031.png" alt=""></a>
Of the Australian Prudential Regulatory Authority's (APRA) decision to tighten mortgage lending guidelines in December, Bloxham observes that "it is unusual in Australia for prudential policy and interest rate settings to be working in opposite directions".
Despite his concerns regarding a potential bubble in Sydney's market, Bloxham does not believe there is a national housing bubble, citing strong fundamental reasons for growth, including low housing supply, well allocated housing debt low urban density and high demand for property.
"However, we do see that the longer housing prices continue to increase faster than household incomes, the greater the chance a bubble could inflate." (See chart below).
<a href="/images/2015/02/10/Picture%2034.png" target="_blank"><img src="/images/2015/02/10/Picture%2034.png" alt=""></a>
"We are also starting to see pockets of the market where bubbles could be forming, given that interest rates have now been low for quite some time," warns Bloxham.
All charts sourced from HSBC.
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Sydney prices to fall: HSBC's bubble warning

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GUEST OBSERVATION
While there may still be a bit of steam left in Sydney’s property engine, I previously described Sydney’s market fundamentals as being <a href="/expert-insights/sydney-s-property-market-is-a-house-of-cards">as fragile as a house of cards</a>.
A statement in February’s Reserve Bank press release could be a suggestion that a joker in the pack may soon be played.
It is this statement from the RBA that could suggest that policy makers may soon play that joker:
"Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market".
The concerns for Sydney are these:
<ol>
<li>Lack of affordability (long been Sydney’s Achilles heel),</li>
<li>A very high level of sales transactions to investors,</li>
<li>Potential tightening of credit policy specific to Sydney,</li>
<li>Potential policy changes by Australia’s Foreign Investment Review Board to curb Asian investors, and</li>
<li>A significant supply of <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/ApartmentsApproved_States_2014-04.jpg" target="_blank">new dwelling stock in the pipeline</a>.</li>
</ol>
Under ‘normal’ circumstances the RBA responds to a property boom with a few interest rate hikes to caution consumers. But this current boom is isolated to Sydney – it’s not like the RBA can raise rates just in Sydney.
In fact, the RBA’s decision at its February meeting to reduce rates has the potential to add fuel Sydney’s market. A subdued employment market and sharp declines in commodity prices are bigger national issues which forced the RBA’s hand.
This is where that “working with other regulators to assess and contain economic risks that may arise from the housing market” comment is so interesting. What if the Foreign Investment Review Board passed legislation to restrict Asian investment in Australian real estate? Joker number one!
What if banks (with some ‘encouragement’ from the likes of APRA and / or RBA) tighten their credit policy just on Sydney-based securities to shelter themselves from extra risk? Banks have been known to do this before when they’ve identified a ‘location risk’ in the likes of the Pilbara and Moranbah. Joker number two!
Another possibility lies in China where there are reports of residential market declines of 15% over the last 12 months. Chinese banking executives and economists say that a severe housing downturn could cause a considerable increase in non-performing loans amongst Chinese banks. We know that when times get tough investment properties are often one of the first assets disposed of in order to bring the household budget back in to order. Further instability in China’s market could result in high levels of resale stock in Sydney. Joker number three!
Regardless, we expect vacancy rates to increase and rental yields to reduce in Sydney. An unhealthily high ratio of investor-owned properties is already occurring with ABS data confirming that 60% of NSW home loan approvals (refer Sydney) were for investors [30% is ‘normal’].
The Fundamentals
The performance of Sydney’s property market over the past 18-24 months is as spectacular as it is concerning.
Contrary to tabloid rhetoric, outside of Sydney, property markets are experiencing <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/MedianValues_Capitals_2011-2014.jpg">a predictable post-GFC recovery phase</a> with normal rates of growth (0 to 6%) over the past 12 months.
The state of New South Wales is home to 7.4 million people (a third of <a href="https://www.propertyology.com.au/wp-content/uploads/2014/10/Aust_PopulationConcentration.jpg">Australia’s total population</a>) and 4.3 million (18.7%) of these are in Sydney
<img src="/images/2015/02/09/pressley%20feb%209%20one.png" alt="">
Greater-Sydney can be broken in to ‘Metropolitan’ and ‘Western Sydney’. With a population of 2.06 million people (8.9% of Australia), Western Sydney on its own is bigger than the combined populations of South Australia, Tasmania, ACT, and Northern Territory.
With a median house price of $730,000 Sydney is the least affordable location in Australia (miles above the capital city average of $580,000).
For the same price that you can buy a Sydney apartment (median value $576,000) you can buy a house in every other location in Australia with the exception of Melbourne.
Sydney’s population growth rate has been below the national average for much of the past 10 years, and only ahead of economic minnows South Australia and Hobart. Rate of growth is completely different to population size.
<img src="/images/2015/02/09/pressley%20feb%209%20two.jpg" alt="">
New South Wales has a long history of people immigrating away from Sydney to alternative locations. Cost of living, especially housing, is a key factor.
<img src="/images/2015/02/09/pressley%20feb%209%20three.jpg" alt="">
Sydney has been Australia's worst performing capital city market since the 2000 Olympic Games. Sydney’s high property prices meant less buyer competition to force the rate of growth that other locations around the country have historically experienced. It’s not until we had 60-year low interest rates that Sydney has first significant price growth spurt in more than a decade.
<img src="/images/2015/02/09/pressley%20feb%209%20four.jpg" alt="">
Through 2000 to 2010, the NSW unemployment rate was regularly above the national average. A massive job swing has recently occurred; of the <a href="https://www.propertyology.com.au/the-environment-for-property-investors-is-healthy/" target="_blank">134,408 jobs created nationally</a> during 2014, 52,975 of these were in Sydney. Boom!
<img src="/images/2015/02/09/pressley%20feb%209%20five.jpg" alt="">
Metropolitan Sydney is Australia’s white-collar capital and unemployment rates are currently up to 50% better than the national average. Much of the recent jobs growth has been in white collar sectors such as financial services. If only people can afford to buy a property in Metro Sydney.
Large parts of Western Sydney, on the other hand, have significantly fewer job opportunities. Manufacturing accounts for 16% of jobs (not ideal in the current climate) while a fifth of all businesses are in the construction industry. Australia’s highest crime rates are in Western Sydney.
<img src="/images/2015/02/09/pressley%20feb%209%20six.png" alt="">
To overcome a reported 182,000 job shortfall, tens of thousands of people have to commute from the more affordable western suburbs to work in metro Sydney each day.
Transport infrastructure has not kept pace with population growth. The rail network has not been significantly expanded since the 1930s, yet the region’s population is now five times greater. The heavy reliance on passenger cars results in horrendous traffic congestion, loss of productivity, and high fuel costs. Remember that earlier Interstate Immigration graph?
15 years of babble about Sydney having run out of land and therefore having <a href="https://www.propertyology.com.au/wp-content/uploads/2014/04/Supply-and-Demand-State-by-State_2014.11.pdf" target="_blank" style="font-size: 12.1599998474121px; line-height: 1.3em;">an under-supplied property market is not totally correct</a>. Metro Sydney’s land shortage has been compensated by higher density construction while sprawl has occurred to the west. Overall, dwelling construction was greater than required until the GFC handbrake was applied. The tightening of supply is another reason for the more recent pressure on Sydney property prices.
There is significantly more supply in the property pipeline. Building approvals are now at record levels.
<img src="/images/2015/02/09/pressley%20feb%209%20seven.jpg" alt="">
My money is on Sydney performing similar to the last 15 years – below the Australian average. But the immediate question is whether policy makers play one of those jokers!
Simon Pressley is managing director of Propertyology, a property market analyst, accredited property investment adviser, and buyer’s agent.
<a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology </a>works exclusively with property investors to purchase properties in strategically chosen locations all over Australia.
<h2>How to purchase high-performing investment properties: a free Propertyology eBook</h2>
 
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The Sydney property market house of cards - the joker in the pack: Simon Pressley

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The most affordable Sydney property reported sold at the weekend was a two bedroom unit on Equity Place at Canley Vale (building pictured above).
It sold for $307,000 through <a href="https://www.century21.com.au/property/314025/" target="_blank">Century 21 Southwest Fairfield agent Nick Dilles</a> to an owner occupier.
It last sold at $175,000 in 2009, having sold for even more in boom time 2004 at $195,000.
It was available for rent at a $260 asking rent of a week in 2011. It was most recently rented at $290 a week.
"It was a second floor unit in a modern block with great long term tenants on an expired lease," Dilles told Property Observer.
 It had two large bedrooms, large lounge/ dining area, eat-in kitchen, internal laundry, plus one bathroom.
The most expensive property reported sold at auction at the weekend was a three bedroom home at 27 Riverside Drive, Sans Souci (pictured below) that sold for $2,700,000 by Raine and Horne Sans Souci.  
<img src="/images/2015/02/09/sans%20souci%20feb%209%20one.jpg" alt="">
 
The 873 square metre waterfront reserve block sits opposite the water.
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Sydney's weekend cheapest, but big bounce back for Canley Vale offering

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North Ryde's houses recorded the strongest median price growth of those in any Sydney suburb in the latter part of 2014, according to Domain Group senior economist Andrew Wilson.
Between the six months to December 2013 and the same period in 2014, North Ryde's median house price jumped 34.9% to $1.25 million.
Wilson attributes much of the growth in large part to rezoning measures, which now allow high rise development along railway lines in North Ryde and Epping, <a href="/news/nsw/the-11-sydney-areas-every-property-investor-should-know-urban-activation-precincts">among other areas in Sydney</a>.
"That's caused quite a bonanza of activity for the homeowners who have been in the rezoned areas", Wilson tells Property Observer.
In 2013, the state government announced North Ryde as one of eight areas in its urban activation precincts program. A 12.5 hectare site, set around 15 kilometres north-west of the city and bounded by the M2, Epping and Delhi roads, was identified as under-utilised.
The strong demand in areas of North Ryde has largely come from developers, says Wilson.
"We've seen a real land-rush from developers trying to secure properties in those areas."
While he notes that the area has "been a strong market for the Chinese community as well", Wilson says "developers are really climbing over themselves to secure property".
Home owners have notably taken advantage of developer interest in the area, with one group of eight residents selling their properties in one line for <a href="https://www.afr.com/p/business/property/residents_in_bonanza_brKDKdsHAAkThFj8UzuleN" target="_blank">$30 million to developers last year</a>.
In May, a developer, Great Wall Investments Pty Ltd, purchased two neighbouring properties at <a href="https://www.realestate.com.au/property-house-nsw-north+ryde-116913931" target="_blank">43 and 45 Jopling Street, North Ryde</a> (pictured below).
<img src="/images/2015/02/09/north%20ryde%20feb%209%20one.jpg" alt="">
The vendors were two residents who had been living side by side for around 30 years, according to agent Ben Boutros. He estimates that each property might have sold for $1 million separately. Together, the two homes sold for $2,887,000, with each seller taking home a 50% share.
Great Wall Investments now plans to build seven villas on the site, with applications lodged for two three bedroom two storey units, three single storey three bedroom units and two two bedroom units.
The results are indicative of what Wilson calls "insatiable demand" in the North Ryde and Epping area since they've been rezoned.
The plans to redevelop the station precinct in North Ryde may be a driver of price growth throughout the suburb, with enhanced public transport, jobs and improved public spaces promised by the New South Wales government.
<a href="https://www.realestate.com.au/property-house-nsw-north+ryde-118328587" target="_blank">4 Beatrice Street in North Ryde</a> (pictured below) sold in North Ryde for $1.27 million in November. In April 2010, it sold for $850,000, a difference of $420,000 (49.4% growth) in three and a half years.
<img src="/images/2015/02/09/north%20ryde%20feb%209%20two.jpg" alt="">
After 15 years of ownership, the vendors of <a href="https://www.realestate.com.au/property-house-nsw-north+ryde-118242887" target="_blank">50 David Avenue</a> (pictured below)  sold the property for $1.45 million late last year. They paid just $172,000 in January 2000, with 743% growth over the 15 years. <img src="/images/2015/02/09/north%20ryde%20feb%209%20three.jpg" alt="">
The investment property is currently rented advertised to rent at $525 per week, reflecting a rental yield of 1.8%.
Wilson notes North Ryde's market performance is in part due to "the overall Sydney zing", with low interest rates, buyer confidence and a strong local economy propelling prices. However, according to Wilson, prices have been "exacerbated by a lot of developer activity". 
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Rezonings help North Ryde become Sydney's hottest suburb

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Way back in 2013 there were a slew of articles doing the rounds warning us that Sydney's housing market was set to slow imminently.
Some commentators were wrong-footed by the regular mid-year falls in CoreLogic RP-Data's home value index. Others felt banks would be unable to fund further growth due to inadequate deposit growth leading to a dearth of credit availability.
As I noted back at that time, you can study charts until the ink falls off the page, but unless you are in the market buying properties, there is always a risk that you will miss a key intangible - sentiment - and as noted on this blog I felt that 2013 and 2014 would be very strong years for Sydney property. December 2013 was perhaps the most marked month of buyer mania that I experienced - with fear of missing out abounding - but generally the market has remained very robust throughout. Sydney's home values have been rising at a rate of well over $2,000 per week for more than 18 months.
<img src="https://1.bp.blogspot.com/-YFWkDFQTu_A/VNco0X3VXKI/AAAAAAAAS_g/R8Ih_7ujW9E/s1600/SYd1.jpg">
Will the market stall?
It's a truism, of course, to say that the market will stall eventually, for trees don't grow to the sky. But will this eventuate this year?
Two main reasons have been given by commentators as to why the market Sydney's market may now stall. Firstly, market regulators might stamp on lending practices, killing off demand. And secondly, it has been said that there aren't enough owner-occupiers in the market to keep upwards pressure on prices.
It is certainly the case that the monthly number of owner-occupier loans being written in the Sydney market has been looking peaky for a long time - since Q2 2013.
<img src="https://1.bp.blogspot.com/-AqOjWGUcIMY/VNco0k34quI/AAAAAAAAS_c/5UByv9BHFLs/s1600/Syd2.jpg"> 
However, movements in dwelling prices are set at the margin, and both average mortgage values written and the price that home buyers are prepared to pay for Sydney dwellings have been soaring since around February 2012.
<img src="https://2.bp.blogspot.com/-5QjVB_rShPA/VNco0RLmbjI/AAAAAAAAS_Y/XZSOrBAkPmE/s1600/SYD3.jpg"> 
Markets are forever granular. I feel that 2015 will be a bumper year for Sydney's inner ring suburbs where investors are running riot; the outer suburbs it's more difficult to say, for I have less first-hand evidence with which to work. 
Below are seven other reasons why the Sydney inner ring market may continue to fire through this calendar year.
<img src="/images/2014/07/04/yellow-one.jpg" alt="">Reserve needs a consumption boom
In its <a href="https://www.rba.gov.au/publications/smp/2015/feb/html/index" target="_blank">Statement on Monetary Policy</a> (SOMP) released on Friday, the Reserve Bank of Australia (RBA) detailed its latest growth forecasts. The growth forecasts seem remarkably optimistic, with GDP growth expected to rebound quickly towards 4% by 2017.
 
 <img src="https://3.bp.blogspot.com/-U3qUyY0VwMg/VNaD0ACtstI/AAAAAAAAS-I/tDQ82nJLtm4/s1600/RBA1.jpg">
 
These forecasts seem particularly upbeat when one considers the component parts of demand and output growth as at the end of Q3 2014.
Although exports are clearly ramping up at speed and housing construction activity is solid, mining investment had collapsed by more than 15% over the preceding year, and 5% in the latest quarter alone. 
Our chart packs show that this <a href="https://petewargent.blogspot.com.au/2015/01/capex-bustlook-out-below" target="_blank">will continue</a> through 2015.
<img src="https://4.bp.blogspot.com/-tCivMyc7VwM/VNaD0ZZ10ZI/AAAAAAAAS-Q/iR5HrnpWOoo/s1600/RBA2.jpg"> 
How then, is the RBA hoping to restore growth to the economy aside from rising export volumes and hopefully a spurt in non-mining capex? 
Two of the planned drivers of growth feature house prices implicitly. 
Firstly, rising house prices are expected to keep the residential construction boom ("dwelling investment") running stronger for longer, although this alone will only comprise perhaps 3.5% of GDP.
And secondly wording of the SOMP is quite explicit in that the Reserve Bank expects rising house prices "should provide further support to consumption growth" via the associated wealth effect.
In fact, the SOMP notes that investor credit growth is likely to continue at its current pace, while also highlighting that mortgage prepayments "are at a high level".
Realsitically, the RBA needs a consumption boom, and the desire to constrain mortgage lending appears very muted, almost an after-thought. 
<img src="/images/2014/07/04/yellow-two.jpg" alt=""> Interest rates have been falling anyway
Mortgage rates are not set by the RBA, but by lenders, and funding costs for Australia's banks fell through 2014.
The average interest rate on outstanding housing loans has continued to slide over recent months - even prior to the February cash rate reduction.
This trend has largely been driven by the replacement of more expensive pre-existing fixed rate loans written prior to 2013.  Over the past year there also have been reductions in advertised interest rates on fixed rate and variable rate loans, in particular the 5 year fixed rates on offer from the majors.
Competition for lending is clearly very strong and both interest rate discounting and broker commissions have increased over the past year.
 <img src="https://4.bp.blogspot.com/-ANPexV15AWg/VNaD1WU_kLI/AAAAAAAAS-Y/rnMnDjxZxqw/s1600/RBA4.jpg">
 <img src="https://2.bp.blogspot.com/-jE6YOzM0C8E/VNaD1urnMlI/AAAAAAAAS-c/e71pXbz4vBc/s1600/RBA5.jpg"> 
On top of this, less than a week ago, the cash rate was cut to just 2.25%. 
Major lenders passed on the full 25bps cut, while Westpac passed on 28bps on its standard variable mortgage rates.
Moreover, analysis of averages often leads to average conclusions. Remember, housing markets are frequently driven by trends at the margin. 
By way of an example of products available to new market entrants, U-Bank announced that it had cut its variable rate to just 4.68%, with a 0.33% discount for new customers. 
If variable mortgage rates from 4.29% don't light a fire under Sydney's housing market I don't know what will.
<img src="/images/2014/07/04/yellow-three.jpg" alt=""> Interest rates will fall even further
One thing we can be certain of is that the RBA would not have cut interest rates in the past week had it felt that only one cut was needed - rate cuts tend to come in pairs. 
In fact, for those paying close attention, the SOMP signalled loud and clear the RBA's intention to cut rates further. 
The key wording is here:
"In preparing the domestic forecasts, a number of technical assumptions have been employed. 
"The forecasts are conditioned on the assumption that the cash rate moves broadly in line with market pricing as at the time of writing."
In short, GDP growth is expected to rebound, but with the help of a cash rate falling to 2% or lower. Markets are pricing in another interest rate cut in the first half of 2015, with implied yields on January 2016 cash rate futures contracts dipping as low as 1.88%, representing some 37bps of further cuts priced in.
 <img src="https://3.bp.blogspot.com/-QR3jiQQbx1w/VNdLdgjmcRI/AAAAAAAAS_4/ZoGm8Do_Hec/s1600/CRF.jpg">
Just in case this wasn't clarity enough, the RBA even marked a line on its cash rate chart to match what cash rate futures markets have already been foretelling - that interest rates are likely to be cut again in due course to 2%. 
<img src="https://3.bp.blogspot.com/-A5H1zPjWRhU/VNaD0lKX1gI/AAAAAAAAS-M/QdBb4xV3LkI/s1600/RBA3.jpg"> 
Article continues on the next page. Please click below. 
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<img src="/images/2014/07/04/yellow-four.jpg" alt=""> Investor loans are exploding
The potential peak in the number of owner-occupier loans written is one thing - what is happening with Sydney's property investors is quite another.
The $5.26 billion of loans written in the last month of available data was by some margin the greatest month of investor lending in any state in Australia's history.
<img src="https://3.bp.blogspot.com/-hEcu8sGi144/VNaGryGMk1I/AAAAAAAAS_I/YxPEELHwh4g/s1600/ILBS.jpg"> 
Cheaper lending rates are only set to be more fuel for the bonfire. <img src="/images/2014/07/04/yellow-five.jpg" alt=""> Nobody's leaving Sydney any more
Sydney's housing market has just about gotten away without building very much for the best part of a decade because in years gone by 20,000 to 30,000 persons per annum typically departed the state, bound for cheaper or sunnier climes.
Not any more. Net interstate migration from New South Wales has fallen to the lowest level on record as Sydneysiders opt to stay put for superior employment prospects.
 <img src="https://4.bp.blogspot.com/-5RwDFcVMSYw/VNaFAFPV4TI/AAAAAAAAS-8/2b-05yuOKSI/s1600/NIM.jpg">
<img src="/images/2014/07/04/yellow-six.jpg" alt=""> There's no stock overhang
Vendors in Melbourne sensing a market peak have been ploughing stock onto the market for some time now, and with an inherent stock overhang 2015 appears likely to be a slower year for dwelling price growth in the Victorian capital.
However, <a href="https://sqmresearch.com.au/pdf/StockmarketJanuary2015.pdf" target="_blank">SQM Research</a>'s figures show that Sydney's stock on market has tightened yet further, falling below 20,000 in January 2015.
<img src="https://2.bp.blogspot.com/-x5ynSdB6S34/VNaD17WJ4MI/AAAAAAAAS-k/-EwQ5mUhHXQ/s1600/SQM.jpg"> 6 - Foreign buyer 'crackdown'?
What about the mooted foreign buyer 'crackdown'? 
Mr Hockey has noted that: "We are actually delivering tougher laws on foreign investment at the same time as ensuring we continue to welcome record levels of foreign investment into Australia”.
Hardly convincing, and the kind of double-speak that would make even Winston Smith blanch - and it's been three decades since 1984.
Hockey has also pointed out that he will soon announce the introduction of an agricultural land register, and a requirement for all purchases of such to be subject to "approval over a certain financial point".
Ditto.
<img src="/images/2014/07/04/yellow-seven.jpg" alt=""> Risk on
Finally, term deposit rates are now at previously unthinkably low levels in Australia, with most products featuring a "three handle" and deposit rates looking set to decline yet further.
If you're looking for a bellwether for risk asset appetite, check out the share price performance of Commonwealth Bank (CBA) or other yield plays over the past three weeks.
Meanwhile the ASX 200 (XJO) has recorded 12 positive trades on the bounce, the longest such run in its history. Inner suburban rents have <a href="https://petewargent.blogspot.com.au/2015/01/inflation-mixed-bag" target="_blank">continued to rise</a> in Sydney, and investors do not need to look too hard to find gross yields of 4.5% on attached dwellings.
The Wrap
Commentators have been calling a slowdown in Sydney's markets for at least 18 months now, but it looks more than likely that 2015 will be another year of strong capital growth in the inner ring suburbs.
Expect Sydney auction clearance rates to kick off in the high 70% range in 2015 as the market finds its feet. Consistent readings of above 80% are typically indicative of boom-like growth.
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.
His new book '<a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>' is out now.
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