Sydney market to slow over next five years

Sydney market to slow over next five years

27 March 2014 by Staff Reporter 0 comments

Growth in Sydney will flatten over the coming years, leading to a slowdown in other capital cities, a property research firm has predicted.

Data from Residex found property values in Sydney had increased by more than 15 per cent in the 12 months to February 2014.

However, the firm predicted annual growth in the city would slow to four per cent over the next five years.

Residex founder and analyst for Onthehouse John Edwards suggested the market was close to peaking because wages have not kept pace with rising prices.

“While property values experienced strong growth in the last quarter of 2013, wages have not grown at the same rate,” he said.

“Sydney’s property market, which is a leading indicator for the national market, has consistently outperformed wages growth, which continues to push property out of reach of buyers.”

Mr Edwards warned values would reach a ceiling at which point demand would drop off.

“There is a natural limit on the maximum value of an asset at any point in time and that is the value at which the masses deem it to be unaffordable. At that point, competition for the asset diminishes,” he said.

“In Sydney, the trend data suggests that house prices are reaching their peak value in dollar terms for this period of growth.”

Mr Edwards saw unemployment and consumer sentiment as signs the market was weakening.

“The poor news on the employment front will be impacting on consumer sentiment and without strong consumer sentiment the market is unlikely to stretch beyond affordability comfort levels,” he said.

Given Sydney is a leading indicator for market conditions across Australia, Residex predicted other capital cities would see a similar trend.

Over the past year, Melbourne saw growth of 10 per cent in median house values, while Perth saw growth of 9.25 per cent.

Residex predicted this growth would slow to three per cent per annum in both cities over the next five years.

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