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Bleak long-term outlook for Sydney

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As investor numbers continue to climb, a leading property expert has warned the Sydney market has weak prospects for continued growth.

Investor participation in property hit a new high in May, accounting for 46.9 per cent of NSW finance commitments, according to the Australian Bureau of Statistics.

Yet RP Data research analyst Cameron Kusher warns investors may have already missed the boat.

“While value growth has been strong in Sydney recently, and attractive to investors, the best time to enter this market was more than two years ago – not now,” he said.

In his view, the market has a weak long-term outlook and is likely to underperform compared to other capitals.

“Although growth is currently quite strong, recent history has shown that Sydney values rise at a more moderate pace than other capital cities,” he said.

According to RP Data statistics, Sydney home values rose by 263.7 per cent over the past 20 years.

In the same timeframe prices increased by 359.4 per cent in Melbourne and 315.9 per cent in Perth.

Mr Kusher warns the last time investor activity climbed to such levels was in late 2003, just before the market begun to decline.

From the market peak in March 2004 to December 2005, values dropped by 8.2 per cent, he said.

He also cautioned investors with a short-term view that they may find it difficult to pull out if values begin to fall.

“The cost of investing in housing is high and it isn’t a liquid asset so exiting a property in a weak market can take a long time plus the exit costs can be quite high once you factor in costs such as agent commissions and conveyancing fees,” he said.

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Highest annual price growth - click a suburb below to view full profile data:
1.
FAIRLIGHT 46.02%
2.
CASUARINA 44.36%
3.
THE ENTRANCE NORTH 41.09%
4.
ULTIMO 40.67%
5.
LAVENDER BAY 40.2%