Sydney’s Poor Supply

Last week we addressed the issues we felt were going to affect property prices in Melbourne; today we will look at  Sydney and see how things are going.

First, the Sydney market has been driven heavily by supply and demand. Sydney’s construction activity is currently lower than it was in the early 1980s, despite the population growing by more than one million people between then and now. Improvements in infrastructure have now made middle ring suburbs attractive to families who would usually stick to inner Sydney. Suburbs such as Beverly Hills, Bankstown, Lidcombe and Epping were traditionally dominated by middle to slightly lower income families, however, now property prices in these areas mean you would need to spend in excess of $800,000 for a good quality home. These areas are currently undergoing a gentrification that has had a positive effect on property prices and the community within.

Houses are not the only ones benefiting from the demographic shift west of the CBD. Median unit prices in Sydney have just hit $500,000, in July 2013, and demand for unit living has strengthened over the last 10 years as more people look to live close to amenities and job hubs. Units are also the preferred investment option as yields make it easy to hold, with the same upside in potential capital growth as a house in the same area.

Ultimately the gap in living standards between the rich and poor will narrow, meaning that property that is relatively cheap will have a better chance to grow than existing stock that is priced well above the median.

Sydney’s population is set to grow as fast as it has been doing in the past, and with construction at pre 1990 levels the squeeze on prices on existing stock is set to continue.

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