Further interest rates rises of up to 50 basis points over a six month period would be necessary to take the heat out of the Sydney residential property market, according to Landmark White.
National property valuers and advisers LandMark White’s CEO Brad Piltz says such a rise, should it eventuate, would see demand fall, particularly for investor stock, and potentially cause a decline in prices in the prestige residential area. (above $5 million for house and $2.5 million for apartments)
However, he says there was no need for property owners to panic as the long-term supply demand ratio was in balance.
Piltz believes poorly located or poor quality and designed property would be impacted the most in any downturn.
For the remainder of the market, Piltz sees limited short-term price growth, but on a macro level a stable demand-supply scenario exists.
“We have tracked the impacts of previous interest rate increases on the market in December 1994, in August 2000 and in June 2002,” he says.
“The biggest impacts were felt in the period’s where we experienced the largest rates rises in the least amount of time.”
Long-term, Piltz says an additional 27,000 dwellings per annum are required, while forecast supply will not exceed 28,000 per annum.
“While demand and supply will be at equilibrium, household debt and disposable income will put enormous pressure on housing prices,” he says.
“Household debt has grown by 16% over the past financial year compared to disposable income increasing by only 1.1% and wages growth of only 4.3% so housing affordability has continued to decline.
“Affordability will continue to deteriorate with increases in interest rates putting a cap on the general market price growth.”
Piltz concluded that some land values would come under downwards pressure, particularly multi-unit sites, as rising construction costs and a reluctance to accept higher prices for finished product impacted on the market.