Predictions: When will the Sydney market bottom out?

The bottom of the market 

The first he said was that the Sydney market could end its downturn during the first six months of next year.

“The Sydney marketplace will continue along the trajectory of decline that’s still seeing a continuing or consistent moderation in a rate of decline before winding up probably in around the first half of 2020, so about a year away before the marketplace bottoms out,” Mr Lawless said.

However, this assumption is based on the market continuing as it is, without any external influences, like macro-economic issues, lowered interest rates and changes in political policies and taxation.

For now, Mr Lawless said that, generally, continues are expected to stick around for some time, but for the most part, the worst has passed.

The credit impact

Credit availability would be key to the market’s future, he said, as he claimed that is what inspired the current downturn.

“We should expect lenders are going to be much more careful about how they assess serviceability and who they’re actually lending money to and what their overall debt levels are like relative to their incomes and their loan amounts.”

For mortgage rates, however, Mr Lawless said it was “anyone’s guess” for what direction they are set to move in, but he guessed they would move downward.

First home buyers were described as being “the bright spark” in the market and could be one of the sources that drive the marketplace forward.

Currently, however, he said mortgages are very low and demand building up from first home buyers could be a reason why the market has reached the lows it has.

Market disruptors

The upcoming federal election has the potential to disrupt these market predictions, as the Labor Party’s policies on negative gearing and capital gains tax concessions, if they manage to pass the senate, would negatively impact the marketplace, according to Mr Lawless, especially during the adjustment period with a lowered number of investors in the market.

“Remember, investors had a lot of disincentives at the moment, not just with the looming changes of those taxation policies,” he said.

“A few budgets ago, we saw depreciation benefits were watered down quite significantly: you can’t depreciate fixtures and fittings any more unless you buy them directly, rental yields are still relatively low, although they are rising quite quickly now, and prospects of capital gains still seem relatively muted as well.

“All the factors that investors look for are generally quite muted at the moment, apart from the fact of course it’s very strong buying conditions and interest rates are really low once you do get into the marketplace.”