Sydney buoyant in slump
Date: 9 October 2008
SYDNEY is unlikely to experience the house price collapses affecting other international cities but the least expensive suburbs will outperform the top ones this year, says Shane Lee, the director of economic and market analysis at Citigroup.
"The credit crunch is having a significant impact on the Australian financial services sector which is now in recession. This poor performance is likely to weigh on the Sydney housing market over the next year as income growth in the industry falls," Mr Lee said.
"The lower end of the Sydney property market is likely to outperform the top and middle ends of the market over the next few quarters.
"Last year the top end of the housing market led the middle part of the market and it follows that the lower end of the market should see moderate price growth," he said.
Mr Lee forecast Sydney house prices to rise by 2 per cent in 2009 and by 7 per cent in 2010.
While noting the strong rise in house prices over recent years had raised fears of a downward price correction, he said Australian house prices looked less vulnerable.
"It is unlikely that Australian house prices will fall as they have in the US, the UK, New Zealand, Germany, Spain and Ireland," Mr Lee said.
A research director with RP Data, Tim Lawless, expected this week's unprecedented interest rate cut would prompt buyers to return to the market, especially in western Sydney.
"Prices are less of a barrier to entry in these locations and renting is losing some of its charm due to the steep rises in weekly rental rates," Mr Lawless said.