Factors Influencing Property Prices

14th September 2018

For 15 years, Sydney and Melbourne have been in a two-horse race when it comes to exponential property growth during this period. Of course, Sydney takes the top position, recording a change in dwelling values of 79.3 per cent in the 10 years up to January 2018.

This narrowly beats Melbourne’s 72.4 per cent and is far ahead of the national average of 41.8 per cent. For investors thinking about jumping into property in- vestment or expanding their portfolio, it’s still a fantastic time to snap up property in Sydney.

Price Growth Projections

The current median price of houses in Sydney is $925,000 and $700,000 for units. Areas like Zetland, Waterloo, Hurstville, Rhodes, Macquarie Park, and the Sydney CBD have experienced particularly strong rates of growth over the years, with prices often well above those averages.

According to projections by TheFinder.com.au using data from CoreLogic, a typical house in Sydney will cost nearly $2 million by the end of 2028 if prices con- tinue to climb at the same pace they have. Units will cost approximately $1.34 million in 10 years’ time. Of course, there are so many variables that might affect how prices change in the future. Keeping this in mind, how can investors find the right property? What signs indicate sustained future growth?

Infrastructure Upgrades

Roads, recreational facilities, amenities like shops and schools, and other public works like bridges, public squares, parks and gardens have a large influence on property values in an area. Neighbourhoods often compete with one another to attract investors, meaning quality amenities and green space becomes crucial business and marketing tools.

Future infrastructure upgrades or new projects is a smart way of identifying points of consideration. Whenever a government or company announces new infra- structure projects, there is a boost to the local community. This includes new em- ployment that stimulates the local economy and better amenities that attract more people to the area, which in turn increases business and investor activity.

Key examples in Sydney include:

● The second airport – the new airport in Badgerys Creek which will cre- ate 4,000 jobs in the construction phase, 35,000 by completion in 2035 and 60,000 by 2060.

● Light rail – The NSW Government started the extension of the inner west light rail line in 2012 and have announced the $16 billion CBD and south east light rail project.

Remember that a proposal is not a plan, and any projects that are announced may be subject to change or cancellation later on, which will also affect prices. Make your choices wisely!

Other Factors Influencing Property Prices

Policies can also have a big impact on property prices, for example:

● Zoning laws
● Foreign investment rules
● First Home Owners Grants
● Development application rules and processes
● Costs of acquiring property, e.g. stamp duty
● Tax benefits including capital gains tax, property depreciation and negative gearing

Consumer confidence is also important. When consumers feel optimistic about the Australian economy, the job market, interest rates etc., they tend to spend more and take on more debt. Consumer confidence tends to correlate with strong property markets.