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‘I’m jumping ship’: Sydney’s runaway property prices take a tumble

Sydney’s runaway property prices have finally stumbled, with both house and unit prices falling last quarter, new data shows.
Nanjing Night Net

Experts say this marks the end of the five-year property boom, and that further growth this year is unlikely.

In the three months to September, the median house price fell 1.9 per cent over to $1,167,516, making it one of the country’s worst performers, Domain Group’s State of the Market report showed.

Despite being the poster child of the property boom, Sydney’s recent price performance was softer than every capital city other than Darwin – where house prices fell 3.6 per cent over the same time period.

The decline brings the harbour city’s year-on-year price growth to 8.2 per cent for houses, up from $1,079,309 in the September 2016 quarter. But it’s now $23,000 cheaper than just three months ago.

The apartment market also recorded a decline in its median price, with a 0.8 per cent fall over the quarter to $732,321.

John Okgrolic, a train guard who lives in the western suburbs, is one Sydney property investor who has already anticipated a shift in the market.

Worried about future price falls, he is now planning to sell his investment property in Cronulla, which he has held for 15 years.

“We’re at the top of the market … I’m jumping ship before it hits the iceberg and sinks,” Mr Okgrolic said.

“When house prices have grown so fast compared to wages growth, you know something is wrong.

“You’d have to be blind and drunk to not see a fall in prices coming.”

Domain Group chief economist Andrew Wilson said the quarterly fall in prices were unsurprising, pointing to lacklustre auction clearance rates and a crackdown on investors from the banking regulator, the Australian Prudential Regulation Authority.

“The market has flattened. It’s the ending of the boom,” Dr Wilson said.

“Chances are we won’tsee prices grow again this year at least – the inner suburbs were holding the market up, but we’re now seeing signs of them easing as well,” he said.

He anticipated a rise in listings – as more rush to sell their homes before the end of the year – could hasten the decline.

While a price slump had also been expected by AMP Capital chief economist Shane Oliver, he said there was less certainty around how big the drop in prices would be.

While he doesn’t foresee a ‘crash’, which he defines as falls of around 20 per cent, he said property values falling up to 10 per cent was a possibility.

“The Sydney market has well and truly cooled,” Dr Oliver said.

A major factor behind the price slump was simply the affordability barrier, Grattan Institute chief executive John Daley said.

“House prices in Sydney have become very high relative to disposable income, and household debt relatively to household income is at an all-time high,” he said.

In the past, those who had borrowed a large sum to get into the property market found their growing wages quickly put them into a more comfortable position, he said. “But when you have low wages growth it takes longer to get out of a difficult situation.”

It’s not the first time the end of the boom has been called.

Mr Daley noted that a price decline occurred in 2015 – with the median house price falling 3.1 per cent in the December quarter – but said it was a “different situation”, with subsequent interest rate cuts helping to revive the market.

At the coalface of the market, buyer’s agents have also found conditions easing in the past few months after years of strong competition and a market that favoured vendors.

Among them is Propertybuyer chief executive Rich Harvey, who said the stabilisation in the market had been long anticipated.

“It’s a levelling off rather than a correction,” Mr Harvey said.

“There’s a strong floor under the property market, with massive infrastructure development creating jobs and amenity, and strong population growth,” he said. But he didn’t anticipate another boom for “at least another seven years”.

He said there were nevertheless still “pie-in-the-sky” vendors who were yet to revise their price expectations to be more realistic.

PK Property Group buyer’s agent Peter Kelaher also said sellers needed to be more pragmatic if they expected to secure a sale.

“Vendors still have their heads in the clouds with their expectations – the prices they want are over the top.

“There’s no doubt we’ve come off the boom, we’re back to a normal market.”

The data also recorded house and apartment rents stable over the quarter, at $550 a week, up from $530 and $525 a week year on year respectively.

This story Administrator ready to work first appeared on Nanjing Night Net.

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