One of Sydney’s leading buyer’s agents has described the ‘perfect storm’ that the market experienced in 2021, while pouring water on the idea that it can continue into 2022.
Lloyd Edge, director of Aus Property Professionals, said the explosion of Sydney house prices last year was the confluence of several factors.
“What we’ve seen with the pandemic is that people weren’t able to go overseas and spend money, or even to go interstate,” he said.
“They were more cashed up and had savings available. Then on top of that, you got this government incentives, like the first home owner grant, and then historically low interest rates.
“That all came together for the perfect storm – it wasn’t just one thing making property prices explode, it was everything at the same time.
“Furthermore, there was a lack of stock on the market as vendors were worried about whether they could make money when they sold during the pandemic. They held off selling, creating a situation of low supply and high demand.
“That continued, because as prices kept rising, vendors thought that if they held off a bit longer, they would make more money later on. The lack of stock continued throughout the year as a result of holding off, which pushed demand yet further.”
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The most recent data from late 2021 has suggested that the Sydney housing market might have reached a peak, with new listings growing and prices plateauing. Still, Lloyd Edge said that it was unlikely that prices would fall.
“I think that things are going to start to turn this year, but there won’t be a decline in prices,” he said.
“What we’ve seen is that APRA have started to instruct the banks that they need to change their lending assessment rate, which makes it harder for some borrowers to get a loan.”
“We saw that happen in 2018, when APRA stepped in and put in a curb because they were capped out with investment lending.
“If people can’t get loans, they can’t buy property, so as that gets more difficult this year it will put a cap on the market.
“The other thing that might happen is interest rate rises. I still don’t think it’ll be until later in the year, or even 12 months from now, but I think the Reserve Bank of Australia (RBA) will eventually look at increasing rates if the property market is still out of control, which will pull things back a little.
“During the pandemic, there was a lot of building grants, but what we are seeing now is the lack of supply as builders take a long time to complete project: some have got into financial difficulties and might yet go under, so there might be a lack of demand in construction because of lack of resources and supply chain issues. That will put a dampener on the housing market too.”