Insight

21.07.21  Property Trends

 

Sydney’s Rising House Prices Part Of A Global Trend

Sydney’s hot property market and fast-rising house prices are part of a global trend.

We take a look at the bigger picture of house price rises.

Australian property values have been rising dramatically since the start of 2021, and Sydney has been a standout performer. The median property price in our harbour city has lifted 15.4% since the start of the year, according to CoreLogic. The median house price (as opposed to apartment price) has risen even faster, lifting an incredible 18.5% since 1 January 2021.

But growing property values aren’t just a Sydney phenomenon or even an Australian one. They’re actually part of a global trend that’s seeing dwelling prices rise rapidly, even as the effects of COVID-19 continue to impact most countries. We explore what’s happening overseas and look at what’s behind growing real estate values around the world.

The New Zealand example

Across the Tasman Sea, it’s no exaggeration to say that New Zealand’s property prices have been going crazy over the past year. In the 12 months to June 2021, they lifted an eye-watering 28.7%, the Real Estate Institute of NZ reports.

On the face of it, there seems to be an obvious reason for property rising prices. Like Australia, New Zealand has had comparatively few infections and even fewer deaths. That means the economy has been growing even in the face of the pandemic (New Zealand’s GDP went up 14% in the September 2020 quarter after falling more than 12% the quarter before). At the same time, wages grew 4.2% over 2020, even as inflation fell. In short, that meant New Zealanders had more money to spend on their homes.

Moving further afield

But that doesn’t really tell the full story about rising property values over the past year because prices have also been going up in countries that have suffered from high caseloads, significant deaths and faltering economies.

In the UK, house prices rose by 13.4% in the year to June 2021 - their highest growth rate since 2004. In the year to April 2021, house prices in the United State rose by 14.3% - their fastest rate in 30 years. And right across Northern Europe from The Netherlands (11.3%) and Germany (8.1%) to Sweden (13%), Norway (10.9%) and Denmark (8.3%) dwelling prices went up quickly.

So if GDP growth alone can’t explain the phenomenon, what can?

People are reassessing the way they live

One of the main reasons dwelling prices are rising is that COVID-19 made people reassess the way they wanted to live and buying a different or bigger home with more space to move was high on that agenda.

For many, this meant a move to the regions. In New Zealand, for example, the top performing region over the past year has been Malborough - a South Island lifestyle region most Australians know for wine. Prices there lifted a massive 56%.

In the UK, prices rose most in Northern Ireland and Wales, while London was the poorest performing region.

Here in Australia, we’ve seen a similar trend, with lifestyle destinations such as the Byron Shire and the Southern Highlands also experiencing stellar growth.

One reason Sydney may have performed strongly too is that our home town is a bit different from many world cities like New York and London insofar as it is a lifestyle location too. With a large enough budget, you can buy into a relaxed lifestyle parkside, harbourside or beachside and we have seen buyers prepared to bid strongly to secure it. So it should come as little surprise that suburbs like Avalon Beach in the north and Cronulla in the south, as well as Maroubra, Bondi and Coogee in our part of Sydney’s Eastern Suburbs, have been performing strongly.

Houses are outstripping apartments

In line with this trend towards people wanting more space, we’ve noticed that house prices are rising much faster than apartment prices. But again that’s not a local trend - it’s a global one. Around the world, people are looking for more room to include a home office, or to make themselves and their families more comfortable when they’re at home.

In the United States, the home prices and rents are going in opposite directions in major cities, as many professionals looking to upgrade their homes to account for remote working. In the UK, prices for city-centre flats have been growing at a much slower rate than the price of family homes.

Money is cheap everywhere

Another reason house prices are rising globally comes down to the cost of credit. It’s not just Australia that’s experiencing record low interest rates. Central banks around the world have been cutting the official cash rate to unprecedentedly low levels. In fact, the UK has the same official cash rate as Australia - 0.1%; across the EU it is 0% and in some countries, like Denmark, Switzerland and Japan, the official cash rate is actually negative. That means that it is currently exceptionally cheap to borrow money. This, in turn, drives property prices higher.

Supply is falling

We’ve written in the past about the lack of listings in our local area and, again, this is something that’s happening in many markets - not just our own. The BBC noted that in the UK, the average number of listings per agent has fallen by around 40% over the past couple of years. Tight supply is also an issue in the United States, where lockdowns have caused many people who would otherwise list to stay put.

A range of trends at play

In short, there are many reasons why property prices have been rising since COVID-19, from lack of stock to low interest rates and from people wanting a change of lifestyle to people needing space for the home office.

The interesting thing about them is that many aren’t exclusive to Sydney’s Eastern Suburbs or even Australia - they’re part of something much bigger that’s affecting property markets around the world.

Want more?

If you’d like advice on buying or selling in today’s market, get in touch.

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