The recent decision by the reserve bank, to once again reduce interest rates to record lows, has fuelled unprecedented demand in the Sydney residential market, which could be described as a “buying frenzy.” Each weekend we are seeing disappointed homebuyers being outbid by investors, who are not content to leave their cash in the bank at what are also record low deposit rates. On top of this investment demand is the pressure on the marketplace driven by migration and a shortage of land in and around Sydney.
In regional areas such as ours however, it is a little different. We see very few immigrants moving to the country, as employment has become scarcer with the mining downturn. We also currently have reasonable supply of land to at least meet demand for housing.
Residential property prices in our region started to stabilise in the latter part of this year and have certainly stabilised now. Whilst demand remains solid, it is investors who are putting depth into the market rather than first homebuyers or those upgrading and downsizing.
Current interest rates allow yield investors to obtain a return of about one percent above the deposit rate, with the added benefit of future growth. Longer term investors can borrow funds at a rate of about one percent above their net rental yield. This attractive scenario has increased the amount of investors in the marketplace and I don’t see this changing.
Overall for the balance of this year I am expecting the market to stay as it is.
Author: Alan Jurd @Jurds Real Estate – Cessnock and Hunter Valley Wine Country Property Experts – the place to buy, sell and lease property in Cessnock and the Hunter Region.