Expected house price growth in 2017 could spell trouble for Sydney

Those working in the property market are bullish there will be even more house price growth in NSW this year, a survey of more than 1800 industry professionals shows. But economic experts warn further strong growth this year spells trouble for Sydney around the corner.

The 2017 ANZ/Property Council Survey found property professionals, including developers and real estate agents, were more positive now than a year ago about the likelihood of price growth in the future, with the index climbing over the previous three quarters.

As can be seen in the graphs below, the index saw the strongest expectations for growth in NSW, followed by Canberra, South Australia and Victoria.

In NSW, the index steadily rose over the past four surveys – though declined in March 2016 when the median house price in Sydney fell below $1 million.

House capital growth expectations, asking experts over the next 12 months in the state you primarily operate, how they expect capital values to change for residential property. March 2017 results. Source: ANZ/Property Council

House capital growth expectations, asking experts over the next 12 months in the state you primarily operate, how they expect capital values to change for residential property. December 2016 results. Source: ANZ/Property Council

Property Council NSW executive director Jane Fitzgerald said the state was in a good position to start the year, with strong economic indicators and positive sentiment from those working in the sector.

The survey was undertaken at the end of 2016 and “certainly is positive”, Ms Fitzgerald said, noting the experts surveyed were “reflecting what they see happening around them”.

“NSW had a strong 2016 and the next 12 months are looking positive with high expectations for growth, investment and hiring across the state,” she said.

SQM Research managing director Louis Christopher also predicts a bullish Sydney housing market, with forecasts of 11 to 16 per cent for the 2017 calendar year – potentially stronger than the results seen in 2016.

“Last year was a tale of two halves, the first half was weak and price growth was kept to the inner ring,” Mr Christopher said.

“This year could be a repeat of 2015 … the first two quarters will be strong.”

Low interest rates, strong population growth and a “prosperous” economy with infrastructure developments under way would help drive most of the growth, he said.

SQM Research’s Housing Boom and Bust Report 2017 warned this anticipated growth would leave Sydney “dangerously overvalued … paving the way for a possible correction in 2018”.

Another research house, BIS Shrapnel, also predict likely price declines in the future for the Sydney market.

“We won’t get price growth forever … we still think things will start to ease back again in 2018,” senior manager Angie Zigomanis said.

The 2017-2018 financial year will see the start of those declines, with falls of 3 per cent expected after growth in the first half of 2017, their Residential Property Prospects 2016 to 2019 report predicted.

Low economic expectations after the mining and construction booms would see “investors pull back” and prices soften as a result.

“If you look at how Sydney was at the end of 2015 to the start of 2016, you can see things softening and the impact of investors,” Mr Zigomanis said.