After six months of declines, Sydney’s house prices rebounded 2.4 per cent over the June quarter, data released on Thursday shows.
The median house price in Sydney jumped back up to $1,021,968, while apartment prices increased 0.6 per cent, Domain Group’s House Price Report for June found.
But house prices are still below the September 2015 record of $1,032,899, with the market’s resurgence yet to entirely reverse the declines seen in the December and March quarters, as recorded by the Australian Bureau of Statistics and Domain.
This positive result will likely be a concern for first time buyers after the recent Housing, Income and Labour Dynamics in Australia survey found just half of Australian adults own their own home.
And the show is not over yet, with many economists predicting the Reserve Bank will cut interest rates further in August in a move that could fuel more interest into the market.
With rate cuts more likely than a hike, buyers need to pay fair market value, or more, to get a foothold into today’s rising market, buyer’s agency PK Property Group managing director Peter Kelaher said.
“The only thing that can change this is higher interest rates, [rising] unemployment or global shocks.”
He expects it could take three years “or longer” for interest rates to begin rising.
“If you’re waiting for a crash to get into the market, you’re going to be waiting for a long time,” he said.
Another cut to interest rates could be on the cards next month if inflation figures are particularly low, which could “only be a positive” for the housing market, NAB chief economist Alan Oster said.
“The bottom line is lower interest rates, some pre-positioning ahead of a potential change to negative gearing … and those concerned about superannuation changes putting their money into investment properties [contributed to the price growth],” Mr Oster said.
The interest rate cut in May brought “investor energy” back into the market and was clearly a driver of the most recent surge, Domain Group chief economist Andrew Wilson said.
“Property owners in the Sydney basin have something to smile about,” Dr Wilson said.
“It’s a spike in the market after two quarters of adjustment, with the outer suburbs showing strong results.
“More than half of all NSW lending is to investors – Sydney is a key target for investors and will continue to be so, which has caused prices to be rising yet again.”
Similar stellar results were recorded in the eastern suburbs, where the median price is now $2.1 million.
A two-bedroom apartment at 5/41 William Street, Double Bay sold in May 2014 for $1 million. In May 2016, it sold for $1.4 million to an owner occupier, 1st City Hasemer + Caldwell principal Brad Caldwell-Eyles said.
“We’re seeing massive increases in prices in a relatively short period of time,” he said.
“I keep being surprised at the results we’re achieving and when we speak to developers and vendors the question is: when is it going to stop? And it just doesn’t.”
A lack of stock and overall supply in the “finite peninsula” of the eastern suburbs, renewed confidence after the election and low interest rates would continue to support the market’s strength, he said.