The (multi) million-dollar question

When will it end? It is a question we asked many times over the past year especially in relation to COVID restrictions but right now it feels pertinent to ask how long can the current market intensity last? That’s really the million-dollar question but there are some things I think we should always keep in mind….

As well as the extraordinary growth in values there was a 23% increase in house and unit sales across the country in March. This combined with listing volumes sitting 26% below the five-year average. This level of extreme demand isn’t going to last forever. 

I say that even though I do think the dramatic shortage of supply of housing stock we are seeing is going to be a long-term market driving force. There is no denying Sydney has a limited supply of homes in desirable established locations. I’ve said it before, we simply can’t make more space for freestanding homes.

But. Even with that reality, there will be a point when the record cumulative growth we have been seeing reaches a peak. As much as property prices have been extraordinary and growth rates at record levels the key foundation for the activity will always be affordability.

And even with record low-interest rates, there will always be a limit to what people can afford to borrow and spend. I went to a briefing at Macquarie Bank last week and they confirmed my suspicion that lending criteria do remain tight. It isn’t a free-for-all. There is a limit.

There will also be inevitable fatigue. It has been good to see that demand for apartments has been rising, albeit without the ferocity of the home market. Many of those buyers have been forced by the market to change their property criteria and the apartment market has improved as a result.

I acknowledge that much of what I’m saying isn’t rocket science, but it is important. It is important because acknowledging those limits will hopefully ease anxiety when the growth does start to ease.

A slowdown doesn’t mean doom. The million-dollar question is when will it happen. I’m afraid I can’t answer that.

Posted in Ewan's Blog on 21st April, 2021