Property Watch
Sun Herald
Sunday May 4, 2008
THE March quarter numbers for property values released by APM this week show a small decline in house and unit prices. Those scarred by the hard landing Sydney property experienced back in 2004 may be thinking, "Here we go again". But there are substantial differences in the property markets of 2004 and 2008.
Let's cast our minds back. In 2004 the construction sector was in full swing. Remember stories of never being able to get a tradesman, and brickies earning more money than surgeons? That was 2002-2003. It started earlier, though; from 2000 onwards it seemed everybody was buying off-the-plan and the world got to know Harry Triguboff. Stories of 50 per cent growth in equity - even before settlement - fuelled asset price speculation like never before. It was easy.Highly geared speculation was rife and property spruikers like Henry Kaye were enjoying their heyday. Investment clubs and so-called wealth creators popped up all over the place like a bad dose of the measles.The apartment market, especially, was being propelled by changes to capital gains tax and the introduction of state and federal first home buyer benefits. The property market was overheated and something had to give.So when the music stopped on this jolly little merry-go-round in 2004, four years' worth of development was only just coming on to the market at precisely the wrong time. A glut of apartments in Sydney was bound to spell trouble.It was not just supply issues in isolation. Sydney's net migration fell through the floor as young familes, disenchanted with affordability issues, left Sydney in droves for the once more affordable south-east Queensland and Victoria - and you know something is wrong when we leak population growth in favour of Melbourne. Inevitably rising interest rates exacerbated affordability issues and ripped away underlying demand from under the Sydney market and heralded a subsequent 8 per cent drop across Sydney by the end of 2005.Sydney 2008 is a very different place. The property market is not coming off the back of a sustained robust property boom - quite the opposite. It has been in the doldrums for four years now. We are not suffering from a glut of housing stock. In fact little has been built since 2004 and rents are starting to climb in response. Today, demand is stable. Affordability issues are no longer driving Sydneysiders interstate in the hope of cheaper property elsewhere. Not that Sydney is more affordable these days, but rather other capitals are no longer comparatively cheap. I don't believe there is another Sydney property crash on the horizon. Even though the property market is under the cloud of much higher interest rates and credit crunch issues we are likely to see a stable market that may provide some good buying opportunities at the bottom of the cycle.
© 2008 Sun Herald
Share This