A year in review. Today we are analysing performance of Australian capital cities. We believe that solid economic performance of capital cities is a big driver for growth of property prices. If Australian capital cities manage to reposition themselves towards knowledge-based economies that should be able to generate sustained economic performance. And where economies perform well people flock. Attracting people results in further demand for housing which drives property prices.
Economic performance and Sydney property market.
How will Sydney property market fair in medium term? Sydney remains the largest and most economically diverse capital of Australia. The contribution of Sydney economic growth to the national economy continues to be significant. Sydney continues to be a leading global city.
We are seeing a number of risks that could negatively impact Sydney property market. Housing policies in NSW capital remain rudimentary which leads to the lowest affordability among Australian states. The same lack of housing planning contributes to Sydney congestion problems. High concentration of jobs in just a few hubs results in significant loss of productivity and traffic congestion.
Transport investment has been lacking for a long while, however we are seeing a reversal of trend of late. Significant investment by the state government in recent years is playing catchup with many years of neglect. We are seeing positive shoots and expect the state government to continue significant transport modernisation program.
High rental costs for businesses could potentially constrain economic growth in the long term.
We believe Sydney property prices are being affected in 20187 due to the downward pressure from above mentioned items. However, we expect Sydney property prices to start flatlining fairly soon. We don’t expect to see the doomsday property crash scenarios seen by another analyst. State government has embarked on significant investment spree to rectify years of transport neglect and there are plans to break the impasse with high concentration of economic activity within Sydney CBD.
Sydney remains an attractive city and should state government continue its modernisation program successfully we expect Sydney prices to perform above average in the long term. However, we expect property prices to underperform in the short term, though we are not expecting Sydney property prices to decline significantly in 2019.