Interest rates buoy Sydney prices

Sydney-property-continues-to-bring-in-good-profits-_157_6001310_0_14101784_300Being a property investor, you’re likely always on the look out for profit-making opportunities, and there are any number of avenues you can take for this purpose. If you want to improve rental yield or purchase a property for long term gain, for instance, buying an investment property requires a fair bit of forward planning and strategy. But if you fall on the capital gain side of investment, recent figures from CoreLogic RP Data could prove particularly appealing.

The release of its home value index has shed some encouraging light on Sydney property prices and, potentially, raises the flag for long term investment profits. Across the combined capital cities, house values climbed 1.4 per cent in March this year. This strong result was pushed along by a surging Sydney market, which has picked up the pace again following a slightly slow 2014.

According to the research, home values in the Harbour City surged an impressive 3 per cent in March, following a similarly strong result of 5.8 per cent growth over the quarter. In fact, over the 12 months to March, Sydney posted the largest price growth rate of any capital city in Australia, outstripping even the buoyant Melbourne market. Whereas the Victorian capital recorded price growth of 5.6 per cent over the year, Sydney flew past with 13.9 per cent growth.

CoreLogic Head of Research Tim Lawless noted that, incredibly, since June 2012 property values in Sydney have skyrocketed 38.8 per cent – and this has spurred investors into action across the city.

“The interest from investors is understandable, with housing currently offering up strong capital gains,” he said.

No pain, but a lot of gain

With house prices on the climb, homeowners and investors might be wondering what this means for their property come sale time. CoreLogic’s quarterly Pain and Gain report has revealed some interesting insights into which regions of Australia have recorded the largest proportion of profit-making sales – and Sydney has come out on top.

The report’s author and Senior Research Analyst Cameron Kusher said the positive result reflected the impressive value growth in the Harbour City. Only 2.4 per cent of properties in the city were sold at a loss for the vendor over the past quarter and it has dropped consistently. The proportion has dropped from 2.5 per cent last quarter, and further still from 3.5 per cent recorded in the same period last year, which could be an encouraging sign for investors.

Building boom

Not only are prices swelling, but demand for new builds in Sydney property looks to be showing no signs of slowing down.The latest lending figures from the Australian Bureau of Statistics (ABS) show that lending for building purposes has grown dramatically, reaching the second highest level in February. This could have a positive outcomes for Sydney’s property market, inspiring owner occupier buyer interest and supporting sales.

“A steady pipeline of new homes represents the most effective solution to alleviating housing affordability pressures,” said HIA Senior Economist Shane Garrett in an April 1 release.

Following this trend, there were 17.5 per cent more new houses approved over the same period, but eye-watering price growth suggests demand is far outstripping supply.

On the other hand, Sydney has seen a record number of dwelling approvals for multi unit properties over the past year. In an April 1 blog post, Cameron Kusher revealed that there were 39,802 dwellings approved over the past year – and the majority have been apartments. Multi unit approvals have grown astronomically, posting a 66.1 per cent increase and accounting for more than half of Sydney’s total building approval numbers.

Mr Kusher did note that this creates a few risk factors, namely oversupply. This is certainly something to keep in mind. With supply steadily creeping up, the prospects for long term capital might be lower than with houses.

It’s worth getting advice from your local real estate agent or property manager on these points. They can help you find a suitable investment or, alternatively, advise you if it is a good time to sell.

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