Median Sydney property prices is the most expensive capital city in Australia and it has reached its highest point in history. Our property market forecast sees expected additional apartment supply, more cautious bank lending and foreign investor stamp duty to limit continue price growth in the near future.
We are not predicting a dramatic fall in apartment or house prices but much more cautious on the local property market going forward. Whatever happens, we still expect Sydney to outperform the Melbourne and Brisbane property market.
Residential Development Trend
One question people always ask is why is Sydney house prices so expensive relative to other capital cities? The map below shows the geographical footprint of the city and shows the city is geographically constraint on 3 sides. It only has one direction to grow and that is out to the west.
The pacific ocean is on the East, 2 National Parks block population growth with Ku-Ring-Gai Chase National Park to the north and Royal National Park to the South. Mona Vale is as north it gets for Sydney with potential expansion of in the North West region across Castle Hill and Rouse Hill.
On the south tip, Cronulla is literally the end of the line. South West is Campbelltown however the infrastructure is not as developed directly West and North West. It could be the next stage for new infrastructure projects.
Unless the NSW State Government decides that population growth can encroach the national parks. It looks like the current footprint has reached the boundary limits.
Blacktown and Mount Druitt will increasing be the closes metro areas for suburbs out west.
The undeniable direction can provide attractive tail wind for real estate investing out West where you know that it will be a captive for future growth. Individuals still need to do homework to find the right investment.
(Read why it is important to understand cross collaterlization)
Sub market Analysis
New Parramatta CBD
Parramatta is the city’s geographic center. Businesses will increasing move out to Parramatta as the second CBD over taking North Sydney. There will be continue employment growth but it will take time however given it has two major advantages with the lower land constraints for commercial offices and more favorable planning rules for high density towers means that real estate cost for companies will remain competitive for the foreseeable future.
In the immediate time frame there is residential over building risk. It looks to have got ahead of it self in new housing projects. There are hundreds of apartment coming up in Parramatta and it will take years for the market to absorb it. We do not expect price or rental growth in the near future. The only grace for current owners is that the borrowing cost will remain low for the next few years as well.
Alternative options
Short term options of instead spreading the population footprint is to build up. Increasing city development density provides increasing economic scale of returns. New projects would take advantage of existing transport infrastructure.
Density Growth Option across Lower North Shore
Unlike the inner west or Eastern suburbs which lacks effective mass transit options. Lower North Shore provides the greatest opportunity to increase density in the City. With construction of Sydney metro lines from Chatswood to Sydney CBD. It will make the area even more attractive for near CBD living.
The North Sydney end of the pacific highway shows the potential of what the whole area could be if more zoning plans are expanded.