Sydney to get ‘sugar hit’ from NSW reopening

The expected influx of travellers into NSW starting next month will give Sydney’s economy a much-needed shot in the arm, according to experts. 

Sydney aerial shot new spi

Pete Wargent, the co-founder of BuyersBuyers, said that the start of quarantine-free international travel for Aussies, slated on 1 November, will provide a timely boost to the city’s economy. 

He said that while travel will only be initially open to Australian citizens and residents, and their families, rather than tourists or international students, the increased air traffic to Sydney leading up to Christmas will have a positive ripple effect on the country’s economy. 

“The move is a crucial step in the process of reopening Australia to the world and getting workers and businesses back towards their full capacity,” he said. 

“This will have a flow-on effect impact in the form of confidence boost and ‘back to normal’ that is greatly needed by individuals and businesses.” 

He acknowledged that the easing of restrictions will also mean Australians wishing to leave will also be allowed to fly out, but that the positives will still outweigh the negatives. “Overall, this move is likely to be a sugar hit for the local economy, and there will be some positive implications for the housing market in Sydney,” he said. 

Mr Wargent said that the impact of NSW’s reopening on the property market will be more apparent in 2022. 

“After a prolonged period of elevated rental vacancies in the CBD and its immediate surrounds, things will start to tighten up over 2022 as new arrivals fly in, and the rental market should strengthen from here, especially for short-stay lets,”  he said. 

Echoing Mr Wargent’s positive outlook, CEO of RiskWise Property Research Doron Peleg named Sydney as the first city to reap the positive impact from international arrivals. 

He added that NSW’s move would also provide the impetus for other states to follow suit. 

“[The move] will ultimately force other states, such as Victoria, to advance their reopening roadmaps,” he said. 

Sydney unit market to emerge as the biggest winner  

Mr Peleg sees Sydney’s unit market emerging as the biggest winners from the local property market developments, particularly APRA’s move to bump the serviceability buffer in response to concerns around overall household debts

He noted that APRA’s latest intervention to tighten lending would make buyers more inclined towards family-suitable units and other attached dwellings as affordable alternatives to freestanding houses. 

“The price differential between houses and units in Sydney has never previously been so stretched, and the deposit gap will push more buyers towards units,” Mr Peleg underlined. 

“Based on our research, the greater the price differences, the higher the likelihood that family-suitable units will deliver strong price increases, as these units deliver an excellent benefit, considering their average price.” 

According to RiskWise, mortgage serviceability ratios are currently favourable for property investors due to the decline in interest rates. RiskWise expects unit prices in the supply-constrained markets of Sydney to appreciate significantly over the coming year, with mortgage rates expected to stay very cheap for some time.

On that note, Mr Wargent issued a word of caution to investors returning to the market, particularly those who have high borrowing capacity. He underscored the importance of buying a property that will give investors a bang for their buck. 

“Buyers need to ensure that they buy a high-quality property, with no significant issues, either in relation to the location of the property or in relation to the specific property attributes,”  he said. 

He noted that buyers should maintain a rational mindset when buying properties. “While there’s currently an outstanding demand for almost all properties, at a later point of time, under ‘normal’ market conditions, the demand for B-grade properties will not be as strong as the demand for top-quality dwelling units,” he said.  

“Buyers should have a cool head and avoid decisions they might regret later.”

 

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