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Property Prices in Sydney and Wollongong

Posted on January 28, 2018
by Phil Grant in Acquisition Blogs, Business Advisory Blogs & BUSINESS Blogs

With a new year comes new opinions on the property market. Everybody has different ideas on what the property market is going to do in the upcoming year and I’m no different. I don’t have a crystal ball but am willing to put my new year prediction up for debate and review.

I will stick to the Sydney market and Wollongong market, being relevant to our immediate business area, and because I think the Sydney market has an impact on Wollongong, so here goes…

Property prices in Sydney and Wollongong will continue to grow in 2018 however not at the levels we have seen in the past few years.

Why property prices will continue to rise:

  • Infrastructure work in Sydney – if you have been to Sydney lately you will have experienced first hand the infrastructure work currently being undertaken. The government is spending billions of dollars on much needed infrastructure projects. This will mean plenty of employment opportunities for people in Sydney and for people from Wollongong who will commute to Sydney for this work;
  • People continue to move to Sydney for economic opportunities – people from outside the area continually move to Sydney for a variety of reasons, and that can include people from Wollongong, interstate or from overseas which continues to drive demand for property;
  • People moving from Sydney to Wollongong will continue – a short time ago one of my real estate clients told me 75% of sales they made in Wollongong were to people from Sydney. This will continue to happen (though maybe at lower levels) as people look for more in a house for their dollar, in particular young families;
  • Supply in Wollongong remaining relatively low – as the area of Wollongong is ‘locked’ between the ocean and the mountain, there is limited amount of land available, in particular close to the ocean. The basic concept of supply vs demand ie. strong demand and low supply, means that prices will continue to rise.

Why property prices won’t rise at previously high levels:

  • Wage increases are lower – employers at various levels whether it be large business or government are putting caps on wage increases, and in some cases are putting a wage freeze on employee wages. This leads to inflation rising faster than wages which creates uncertainty for people looking to move house or purchase property;
  • Banks tightening lending – banks are nervous about the property market and the ‘bubble’ bursting therefore they are less willing to lend as much as they have previously. This tightening of lending is also attributable to the increased capital holding requirements the regulators have imposed on banks.
  • Uncertainty over government – the unpopularity over the Federal Government (and State Government for that matter) continues amongst the population so a change in government is always likely. This creates uncertainty over existing legislation which in turn creates uncertainty in the property market.
  • Uncertainty over economy – uncertainty over the economy on a federal and, to a degree, an overseas level, creates caution among would-be property purchasers who would prefer to wait to see what happens in the property market before taking the plunge to buy. There is also talk that some believe the property boom is over and there might actually be a downturn, so confidence is lower in the property market.
  • Acquisition costs and holding costs remain high – acquisition costs, such as stamp duty, continue to be a barrier to people buying property. Further, holding costs such as rates and land tax continue to rise which again creates uncertainty in the market.
  • High levels of construction activity, especially high rise apartment blocks, will create more supply – people will have seen plenty of construction of multi-story and high-rise apartment blocks both in Wollongong and Sydney in the last couple of years. As these buildings are completed, more and more properties go on the market, increasing the supply and thus having an impact of the price of properties in those areas.

So there you have it, my prediction for property prices in 2018!

Other (maybe of more interest than the above) predictions for 2018 are:

  • 2018 World Cup Winners: Germany
  • NRL grand final winners – Roosters
  • AFL grand final winners – Richmond
  • A-League winners – Sydney FC

Let the arguments begin!!!

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