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Despite the softening state of the Sydney property market, experts believe that the capital city is up for a strong comeback soon. Should investors purchase more assets in the capital city now?
After an unprecedented property boom years ago, the large property markets of Sydney and Melbourne started to experience several months of price declines and stagnated growth. However, contrary to doom-and-gloom headlines, experts say that these fluctuations are simply part of the natural market cycle.
The Sydney property market, in particular, is said to be ‘normalising’ recently, so much so that experts are finding several indicators of another rise in the market.
According to Right Property Group’s Victor Kumar: “I'm starting to see the first snippets of a comeback in the sense that the agents I was dealing with in the last cycle are starting to reach out again, slowly but surely.”
While these agents aren’t exactly offering one property after another, the fact that they are rekindling professional relationships with their clients means that the market is showing signs of recovery and progress, and they want their clients to be the first in line once the market starts to climb back up.
The activities of real estate agents are often good indicators of market performance since these professionals acquire data ‘on the ground’, which allows them to predict significant changes based on thorough research and market analysis.
Apart from real estate agents, rental yields, building approvals and major infrastructure constructions can also help investors understand the current market cycle.
In Sydney, builders are currently slowing down on new projects to avoid having to deal with the repercussions of oversupply. Consequently, people start panicking due to lack of new market activity and they stop buying property. This pattern points to a softening in the market, according to Mr Kumar.
Once the levels of demand and supply balance out and building activities start again, that would signal the start of a fresh cycle.
The property expert explained: “We get to a point where we've all taken a panic and we stopped building, we stopped buying. Then comes this great tipping point where you've got grants that are being pushed up because they aren't enough properties being built and the stock starts drying up on the ground.”
“That starts the cycle again. So, we start building, but then we build too much. We build too much and it comes to a point where the supply tips the other way, where you've got too many properties and too many rental properties available. Then people ease back again,” he added.
The Sydney property market is still experiencing the effects of oversupply and will, therefore, remain as a flat market for a while. However, the strong fundamentals in the market, as well as its rich local economy, will certainly aid the ‘world-class city’ into recovery over time.
While experts don’t advice jumping into a new purchase in Sydney right now as it remains on its softening phase, investors would do well to keep their eyes open for wealth-creation opportunities in the capital city’s property market.
Sydney, once the biggest and most lucrative property market in Australia, may be going flat, but it’s certainly not going to crash any time soon.
At the end of the day, it is a ‘world-class city’ with one of the biggest populations in the country, rich and varied industries, multiple employment nodes and other economic factors that influence the growth of properties.
Mr Kumar said: “If we've had 75 per cent gain in a very short period of time and you've come back or contracted by five per cent, it's not the end of the world. As long as you have control on your portfolio in terms of cash flow and equity buffers, there’s nothing to worry about.”
“Just always keep your eyes open because there’s always an opportunity any day of any week, and be realistic. You know it's not going to be blue sky-growth forever and ever,” he concluded.
Tune in to the August episode of Investing Insights with the Right Property Group to know more about the different ways to weather market fluctuations in Sydney and other big property markets.
An investment is an asset or item purchased with the expectation that it will generate income or appreciate in value in the future.