Sydney Leads Prime Housing Price Growth Forecast
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Sydney Leads Prime Housing Price Growth Forecast

The city is expected to see prices rise 10% this year, according to Knight Frank research.

By V.L Hendrickson
Wed, Jul 21, 2021 10:01amGrey Clock 2 min

The average price of a luxury property in Sydney, Australia, is set to rise 10% this year, the biggest jump of any city included in Knight Frank’s prime residential price forecast, released Wednesday in the U.K.

Next year, Sydney is on track to share the top spot with London. Average prices in both cities are expected to jump 7% in 2022, according to Knight Frank. Although that’s a dip for Sydney prices, it marks a 5% increase for London, where 2021 prices are set to rise just 2%—the smallest uptick on the index.

Across the 11 cities considered, average prime prices are set to jump 4% in 2021, according to Knight Frank. That’s up from a 1% increase predicted by Knight Frank early in the Covid-19 pandemic in May 2020, and a 3% rise in December 2020.

Government measures have helped protect economies, and cities are now on the rebound, according to Kate Everett-Allen, head of international residential research at Knight Frank.

“Government fiscal stimulus measures have been revised upward, protecting jobs and incomes via furlough schemes, meaning there have been few forced property sales,” she said in the report. “Banks in key developed markets offered mortgage holidays to customers reducing repossessions and foreclosures.”

In addition, the pandemic has inspired many buyers to relocate or expand their holdings.

“Households accrued a total of over US$5 trillion globally in savings during lockdown, enabling some homeowners to undertake home improvements,” Ms. Everett-Allen continued. “Others have opted to relocate, upsize, downsize or buy a second home/investment property.”

This year, Miami is predicted to have the second-highest growth in average prices, 6%, with a 4% bump in 2022, the data showed. Los Angeles and Hong Kong followed, both with 5% increases predicted for 2021 and 2022.

New York should see prices rise by 4% this year, which would be the first positive price growth since 2018 and its strongest performance since 2015, according to Knight Frank. In 2022, they are set to rise 3%.

And although average prices in Madrid are predicted to tick up 3% in 2021, they could rise 6% in 2022, the brokerage forecasted.

Potential headwinds that could stymie the market include slow vaccine rollouts and the unknown path of the Delta variant of the Covid-19 virus, rising interest rates and government cooling measures, according to the report.

Reprinted by permission of Mansion Global. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: July 20, 2021.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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