Sydney Australia Real Estate, Why is It Hot?

Why are prices of Sydney Australia real estate so expensive and why would they keep going up?

Eight Reasons for Prices to Continue on The Way Up

If we are to consider history, house prices should go flat or down for a while and then shoot to new highs. But they may just keep going up.

Here are 8 reasons for real estate in Australia and especially in Sydney to continue its growth trend. It is a virtuous circle, based on:

1. Economy
2. Population
3. Salaries
4. Interest Rates
5. Confidence
6. Property Investment
7. Building Activity
8. Household Size

One factor drives the other and together they keep the market hot.

#1. Economy

Sydney Australia real estate did not lose value during our mild recession. The financial crisis did not hit the Australian economy as hard as it did others countries. The need for resources kept Australia in an enviable position and while some staff was made redundant, especially in the financial sector, not many jobs were lost during the recession.

The economy bounced back quickly and unemployment is running low again. This means most houses kept their value, and especially prices at the top end, which are less sensitive to market tremors.

#2. Population

The population keeps increasing naturally and through immigration. And a large number of skilled migrants prefer Sydney. So there are more people that need houses.

#3. Salaries

With the economy going well, there are more jobs in the market and not enough talent to fill them. More jobs drive wages up so people are more positive about their future and start investing or spending more money. They have more money available to pay a mortgage.

#4. Low Interest Rates Fueled Sydney Australia Real Estate

The interest rates went down during the crisis, so keeping up with mortgage repayments or even paying more was easier. They didn't go as low as in US or other hard hit economies, but offered a welcome relief to many families struggling with their mortgage.

For example a decrease in interest rate from 9% to 5.5% on a $400,000, 25 years mortgage reduced monthly payments by 900 $.

Then interest rates crept back up, but did not reach the levels before the 2008 recession. They are now decreasing again, with the turmoil in Europe influencing the rest of the world.

#5. Confidence

Strong economy, good wages and low interest rates drive the level of confidence up, so house hunters are quick to snap homes when they come to the market.

#6. Property Investors

Investors have come back to the property market as shares lost their oomph during the recession. Bricks and mortar appear to be safer in such times.

As low to mid priced properties tend to have a higher yield than the more expensive homes, this is where the large majority invests in. This is also the first home buyers territory, so it is becoming more difficult to get that first house.

#7. Real Estate Sydney - Not Much New Building

There are not many new houses being built. And very few land releases.

Which means more people have to compete for the existing houses.

And drive prices up.

#8. Number of People in a House

Households tend to get smaller:

• marriages can split, so one of the partners needs to find a new home,
• young adults move away from mum and dad's home.

What used to be a household for several people becomes a home for one or two. The others are on the market looking for a new house to live in.

There are other indicators that point to prices of real estate in Sydney Australia cooling down. See here more.

Real estate is always a moving target, changes happen very quickly and there are more and more people thinking the bubble is about to burst.

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