Pre-Covid and Post-Covid (AND the Bit in the Middle!)
Updated: Jun 27, 2020
It’s easy to look back at the course of Sydney's real estate market and analyse why it went Up, Down or Sideways over the past month, year or decade. Looking forward is harder.
Where we've come from:
The Pre-COVID market had been rising since May 2019, specifically following the Federal election day. That may have been the market approving the result or simply (and more likely) a notion of political stability and confidence after an eighteen-month correction. In fact, the Sydney residential market has, with a few notable ‘Blips’, increased approximately 7-10% per annum year on year.
The underlying reason, in my mind anyway, links straight back to Australia's, and Sydney's, population growth. In 2000 Australia's population was 19.1 million*, today that stands at 25.7 million*. A 34% increase over twenty years means our population has grown, as a percentage, more than any other OECD country. Net annual immigration of approx. 230,000 drives not only our economic growth but house prices in Sydney/Melbourne too.
Which brings us to NOW:
In today’s COVID-19 lock-down environment, immigration is virtually zero and frankly it’s likely to stay that way till the world is immunised. Reading the media on that process suggests it's likely to be another 6-24 months. So, the tap has been firmly turned OFF on our main economic and property driver. Since February this year prices have dropped approximately 8-10% and volumes have halved. Six weeks of no Open Inspections or live auctions pushed many agents/vendors to abandon auctions and concentrate on private treaty campaigns. But most notable has been the increased number of quiet off-market listings.
There’s been some interesting and notable mumblings from the left and right of Canberra's & "Bubble" about rethinking (cutting) immigration numbers when we are again able to open that gate. However, with the interest rate mechanism all but exhausted, I expect the government of the day (Coalition or Labor) will be engaging any and every economic lever they can, to get the economy off its current life support status.
My crystal ball** suggests the Sydney property market has another 5-10% to soften this year before levelling out. BUT inevitably, once the ship steadies and the primary driver returns, the upward trend will return with a vengeance. Think about it, Australia and Sydney will be more desirable than ever! Our cities population stands at 5.75 million and is heading to seven million before the end of the decade. Limited space and increasing demand in one of the world’s truly beautiful cities means just one thing for house prices in the medium to long term.
* Australian Bureau of Statistics
** Not a "Dead Cert" and not to be used as a flotation device!
There is always value in great property. Find it. Buy it. Love it.