Sydney's middle property market continues to power along: Pete Wargent
I think it would be fair to say that nobody enjoys blogs where the blogger includes the words "I told you so", but y'know what...
It's true that I've been harping on about this for far too long now, but the most resilient market in Australia was always going to be Sydney's broad middle market.
As reported in this article here, Sydney's broad middle market is the only sector of Australia's property markets to be at all-time high prices, which is what I have been suggesting on this blog for well over the past year.
Of course, the cheap low-demand sectors of the Sydney market have not performed so well and the top end of the market has also eased, as one would expect given the share market correction and low confidence we have experienced.
But the broad middle sector of that market continues to power along.
It's more than half a decade now since the real scaremongering began in Australian property, but in spite of all the predictions of wider market crashes most markets are well ahead of where they were at that time.
Prices in Sydney and Melbourne have raced ahead since Professor Steve Keen's infamous "prices will crash by 40%" call meaning that prices are simply a mile away from where he said they would be.
It seems to be increasingly common for housing market bears to make sweeping statements about markets tumbling that generally imply that all property markets will inevitably crash andall people who invest in property are greedy and unethical landlords.
The first part is wrong. Experienced investors tend to do well even when some markets are tanking, in particular by investing in those properties which are in the highest demand, and often those close to median prices.
The second part is formed around the argument that property should be for shelter (unquestionably true) and therefore greedy landlords should not invest in property. I'm not really sure how that works and who would then own the properties for the rental market, so I'll leave others to debate that.
It's continually overlooked that it is not only "greedy" investors who push up property market prices - it is also "greedy" home-buyers, the category which presumably those praying for a crash ultimately hope to be in.
This is the invisible hand of capitalism at work - supply versus demand. Some property markets where demand is low and appetite for debt weak will continue to fall in price in 2013. But in the popular suburbs of cities such as Sydney? I wouldn't be holding my breath for any major super-correction.
As for being bearish Sydney's broad middle market back then with the population of the city growing at a stonking 60,000 people per annum and appropriate developments rarely seeming to come online, to nab the phrase of one witty forum contributor: "That was like shorting oxygen."
Pete Wargent holds a range of finance and property qualifications and is the author of Get a Financial Grip – a simple plan for financial freedom.
Marrickville picture by Brian Yap, courtesy of Flickr.
