House Prices Flat, Rent Prices Inflate
Before 2010, it was predicted that property prices in Sydney would grow by eight percent, the market will slow down due to the cancellation of the First Home Owners Grant and increasing interest rates. It was also predicted that building approvals will increase and the upper property market will fare better than the lower end though the high end of the market will register a decline in vacancy rates.
It was also forecasted that the lower end of the property market will be tightly contested with an interest rate of beyond eight percent spelling doom for the property market in Sydney. After seeing what happened, the property market did slow down with Sydney real estate prices decreasing during the last six months of 2010.
Thanks to bullish growth in the first half of the year, Sydney’s annual growth rate was at eight percent. Also, building approvals did increase in the first months of the year while it remains to be seen whether the upper end of the property market did better than the lower end, although the performance of the high property market was better than 2009.
As for 2011, it has been predicted that rental fees will increase and vacancy rates will be in the seven to nine percent range for the majority of the property market. Also, building approvals will decrease due to the decreased activity of investors due to the increasing interest rates.
While the high end of the Sydney property market is expected to underperform, properties in the western and southwestern part of the city are predicted to incur higher rental fees and stronger capital growth. Also, houses that have values within the $1 million mark will provide discounts.
Home loan interest rates must be at most eight percent to avoid negative impact to the property market of Sydney while house prices in the city for 2011 can stay flat or gradually decrease by up to four percent. With more official cash rate increases set to come in the next year, the overall Australian property market might decline.