07.05.2017 Buying Tips

Sydney Property Bubble: Media Myth or Real Estate Reality?

Sydney Property Bubble: Media Myth or Real Estate Reality?

For well over a year now, Australia’s real estate reporters have published warnings about a Sydney housing bubble and predictions of a coming price crash.

The latest report from KPMG Economics forecasts a ‘cooling’ of the market starting next year. Accurate or not, the fact is these stories can end up influencing the market, rather than reflecting it.

Why the ‘property bubble’ myth persists

It’s true that average property prices have risen across Sydney over the past five years. The Australian Bureau of Statistics had median house prices at just over $500,000 in 2011, compared to $970,000 in 2016. This growth outstrips that seen in any other capital city.

Focusing on these figures alone, it’s easy to see why the media can become convinced that Sydney house prices are unsustainable and heading for a sharp downturn. But median prices are only part of a much more complex picture.

The reality in Sydney’s eastern suburbs

The fact is that Sydney real estate can never be summed up as a single market. Even in the eastern suburbs, there are at least four markets: harbourside suburbs, beachside suburbs, those surrounding Centennial Park and the suburbs next to the CBD itself. Trends in each of these markets tell a slightly different story from each other and from the rest of Sydney.

While there has been some loosening of housing stock in the east this year compared to 2016, the reality is that Sydney’s eastern suburbs will remain a sellers market for the foreseeable future. Even if prices begin to fall elsewhere in Sydney, these blue chip suburbs will likely retain their desirability for locals, expats and foreign buyers alike.

Weekly Market Insight
Receive Ben Collier's Weekly Market Insight directly to your inbox.
Sign Up
  • Enter your details to receive the report
  • Enter your details to receive the report
  • Enter your details to receive the report
  • This field is for validation purposes and should be left unchanged.

How reporting influences the market

Reports that Sydney’s market is overvalued could, in fact, lead to the price slowdown they predict. The process works like this:

  1. Media reports state Sydney’s property prices are overinflated and buyers are paying too much.
  2. Buyers react to these reports by deciding to wait to buy until after the market has peaked.
  3. Fewer buyers leads to lower numbers at inspections and fewer bidders at auction, so some properties do in fact sell for less.

Other stories that influence market movement

Reports about a supposed property bubble aren’t the only news stories that can end up having an influence on the market. Buyers and sellers can also be swayed by reports about:

  • Auction clearance rates: Weekly reports on auction clearance rates are compelling, but they don’t always signal larger trends. Clearance rates down on last week, or last year, shouldn’t be taken as a sign of a cooling market.
  • Crime statistics: An increase in an area’s crime rate, or reports of a major incident, in a particular suburb don’t go unnoticed by prospective buyers.
  • Overseas buyer interest: Reports that overseas buyers are suddenly interested in an area can end up discouraging locals, particularly those looking to enter the market for the first time who don’t feel prepared to face a challenging auction.

Balancing reports with real market trends

There’s no need to ignore every headline, but remember to balance what you read and hear with the bigger picture. The market moves much more slowly than the daily news cycle.

For expert advice on market trends in your suburb or the area where you plan to buy, contact our team today.