The recipe that cooked up Sydney’s real estate surge: Terry Ryder
Here's a clue as to why Sydney has been having a property boom that no other capital city has come close to matching. NSW has the nation's No.1 economy and, according to ABS data, has created more jobs in the past six months than the rest of Australia combined.
That remarkable situation provides the best explanation of the Sydney real estate boom, far more so than the flimsy offering from most economists, who attribute the boom to low interest rates (but can't explain why Brisbane, Perth, Canberra, Adelaide, Darwin, Hobart and most of regional Australia aren't having price booms).
The Sydney/NSW economy is pumping, boosted by high levels of spending on infrastructure and a return of business confidence thanks to changes in the political scene.
According to the ABS, NSW has added 85,600 jobs since January. All the other states and territories have managed a combined 68,000.
The NSW economy has been rising steadily ever since the worst government in my lifetime, the 16-year-old NSW Labor Government, was tossed out in a predictable landslide in 2011.
With that change, things that had been long absent from Sydney and NSW began to happen again. Decisions started being made. Infrastructure spending resumed. The economy awoke from its coma and business re-opened. Jobs started to be created, with those latest figures from the ABS providing evidence of a process that has been four years in the making.
According to ANZ research, employment growth in NSW has been led by four industry sectors: health, education, hospitality and professional services.
It’s not a coincidence that the rise of the Sydney property market after 10 dormant years has happened during this resuscitation of the NSW economy.
Low interest rates, the fallback position of economists who haven’t got a clue (i.e. most of them), have little or nothing to do with Sydney’s elevated market.
If it was all about interest rates, Perth prices would be zooming instead of going backwards. A clue to the decline of the Perth market is also found in the ABS employment figures: Western Australia, previously a leading generator of jobs, has created only 8,500 positions in the past six months, one-tenth of that managed by NSW. Since January the WA unemployment rate has risen from 5.5% to 6.3%.
Just three years ago, the NSW ranked joint second last, alongside South Australia, in the CommSec State of the States report. Back in July 2012, it was “WA first and daylight second”, according to one media report. The ACT, the Northern Territory, Queensland and Victoria all ranked above mediocre NSW, which was tied with SA in sixth place, with only Tasmania ranked lower.
Fast forward three years and the latest State of the States report indicates that NSW is now entrenched as the No.1 strongest economy in the land, having taken over the top ranking from WA last year.
NSW ranks first or second among the states and territories on population growth, retail trade, employment, equipment investment and housing construction.
A growing economy, extensive spending on transport and other infrastructure, the return of confidence in the state government and the local economy, solid population growth, jobs being created – that’s the recipe that cooked up Sydney’s real estate surge. And it would have happened if the RBA hadn’t been cutting interest rates.
TERRY RYDER is the founder of hotspotting.com.au. You can email him or follow him on Twitter.
