The Sydney property market moving into dangerous ground – Buyers Agent News

The Sydney market could be moving into dangerous ground and a “boom mentality”, Residex’s John Edwards has warned.

Edwards said that growth in the Melboure and Sydney markets has been strong, however it appears to be Sydney that concerns him most.

He noted that the growth in real terms, after inflation, over the last 12 months has been 17.25% for houses and 10.78% for units.

“It is reasonable to suggest that this market is approaching a boom mentality and this situation is dangerous, particularly for those who are borrowing heavily to get into the market. Interest rates are more likely than not to increase now as we move forward,” he wrote of the price rises.
He noted that the current median value of Sydney houses, at $821,500, required the median Sydney family to pay 52% of their after-tax income to support repayments, even with a 20% deposit, leaving $812 per week available.

He noted that, historically, once the 50% mark has been breached on the Affordability Ratio, the market tends to adjust.
“The high rate of growth will cause the Reserve Bank of Australia (RBA) some level of anxiety and potentially ensure there are no further interest rate decreases, and possibly bring forward interest rate increases,” said Edwards.

“All are expecting unemployment levels to increase and this situation, coupled will all of the above, could be a recipe for some significant adjustments later this year or, more likely, early next year,” he noted.

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