The property sector is booming at this time – and understandably, everyone wants to know what’s going to happen next.
New South Wales is no exception – sales settlements continue to track strongly, with significant year-on-year growth being recorded throughout 2021.
PEXA’s Senior Research Manager Mike Gill spoke to Urban Development Institute of Australia – NSW CEO Steve Mann at the recent PropertyX Connect event in Sydney to answer industry’s burning questions on current market performance, trends, and what we can expect to see in NSW over the coming months.
Mike: How are you seeing the current market and how is this cycle different to other turns we’ve seen?
Steve: It’s definitely an exciting market in New South Wales right now. We’re seeing a lot of growth – in Sydney, this is likely largely because of pent up demand, especially post COVID. It’s also been driven by first home buyers utilising Government initiatives.
This segment needed to come back as they’ve been out of the market for some time, in part due to rising actual prices and property affordability.
On the other hand, the media has reported that housing finance has gone through the roof, but I wouldn’t be so sure. When we look at the annual change it does appear to have gone up, but when you look at the peak most of the markets in Sydney and NSW at least, they haven’t hit the peak we saw in 2018 despite strong rebounds from the pandemic.
Mike: How are the greenfield and the off the plan markets tracking?
Steve: My view is that if we don’t act quickly and stimulate supply, we are going to have issues. If we think about it, when do markets have strong prices? When supply doesn’t meet demand.
For example, apartment completions are down 26% from the peak and approvals are down 64%, so there’s less apartments coming on the market. This indicates we’re heading for a crisis which means we could have at minimum a 50% reduction in apartment supply, with the potential flow on effect of jobs being at risk. There’s certainly plenty of demand, but just not enough new supply coming online.
Mike: You sit on an advisory committee to the NSW Government on the impact of the proposed stamp duty changes. What do you think of these changes and what impacts might they have on the NSW property market?
Steve: Stamp duty itself is a small, broad percentage, so its effectively a land tax. No one wants to walk away from it, even though implementing it is complicated. Stamp duty favours apartments as they’re on less land. The rates are reasonable, but the big issue here is transitioning into this new method.
The treasurer wants the federal government to buy into it, but on the other hand we have Victoria who have just halved their stamp duty and they’re racing ahead of NSW in new land sales. Looking back, I would’ve liked NSW to do a 50% stamp duty discount to start off with, but I think we still jumped into it too close to COVID-19.
Mike: What are the UDIA’s predictions for price growth over the next 12-24 months?
Steve: What we should be looking at here instead is the conversation between APRA (Australian Prudential Regulation Authority) and RBA (Reserve Bank of Australia) – there’s an interesting debate there. The question is whose mandate says they need to think about housing prices? They’re both saying neither. Now the RBA governor is holding interest rates low until 2024, as he wants to wait for unemployment to improve and wages to increase.
However, the longer this standoff around who’ll measure house prices and ongoing supply issues, the longer prices will continue to go up. It’s something that really comes into the debate around moderating the housing market. Truthfully, we need a smoother market, which would make it much easier for all stakeholders.