Sydney property prices jumped 18.9 per cent last financial year – but Domain Group senior economist Andrew Wilson said the Sydney market has passed its peak.
“It was quite an extraordinary bull market, working very high on confidence and exuberance, but I think we’re coming back to a more realistic market,” he told REB.
Dr Wilson said the cooling has become evident in the past few weeks as auction clearance rates have declined.
“We were getting those 90 per cent auction clearance rates in the middle of May, which were quite extraordinary, but since then the market has moved its way back into a more balanced stance,” he said.
Part of the reason is that the investor lending crackdown is having an effect, while supply has also started to catch up with demand as people rush their home to market, according to Dr Wilson.
“Also, with interest rates now being on hold [since May] and the likelihood that they’ll remain on hold for the foreseeable future, it means that buyers just don’t have that capacity to keep pushing up prices, particularly with income growth quite moderate or flat,” he said.
While Sydney may be cooling, Onthehouse.com.au market analyst Eliza Owen doesn't think Melbourne has reached the end of its boom period, after growing 7.8 per cent in 2014-15.
“What tends to happen with historical growth in Melbourne, and it has done this since the 1970s, is that you have really long periods of quite large losses and then that is followed by two or three smaller upswings in percentage terms,” she told REB.
According to Ms Owen, Melbourne’s position on the cycle means it has just passed the first upswing.
“What might happen is that over the rest of this year, you’re going to see growth rates in Melbourne potentially slowing or even going down a little, but I don’t think this is the end of the boom period,” she said.
“We do see these short-term upswings and downswings, but if you look at the growth in dwellings over the last 20 to 30 years, they’re much higher in value now, so looking at the long term, it never really goes down.”