Onthehouse Market Update, page-10

Sydney

• Sydney remains the most expensive market across the
country, and was the top growth performer in the last year.

• Sydney house values increased by 16.83% in the last 12
months, while unit values grew by 13.99%.

• Affordability in Sydney has reached an unacceptable level. It
now takes more than 55% of after tax income to make
home loan repayments on the median value house.

• When a city becomes too expensive to live in people tend to
exit the market, causing lower levels of demand for housing
stock. Investors should be careful of a situation where the
best alternative to comfortable living is to leave Sydney and
seek employment elsewhere.

• Residex calculates a potential dwelling surplus of about
4,000 dwellings.

• For the moment, growth in Sydney house prices is slowing.
This is a healthy sign as a further slowing from here means
future market corrections are unlikely. Should the rate of
growth increase then the longer the growth cycle continues
the larger any corrections are likely to be.

• Overall, there is still growth to come in this market over the
next 12 months, and the high levels of immigration are
likely to help absorb the excess of stock during this period.

• There is little alternative to rental increases over the next
few years. This will assist investors by covering increasing
interest rates when they come.