A flood of new listings set to come to market this month will not be enough to make a tangible impact on undersupply in New South Wales.
That’s the view of the Real Estate Institute of NSW Chief Executive Officer Tim McKibbin who sees continued tight supply and strong demand continuing to put upward pressure on house prices in both Sydney and regional NSW.
Mr McKibbin said even though the market is expected to see a huge influx of new listings in February, this won’t be enough to meet the strong buyer demand the state is currently experiencing.
“Agents are ready to hit the button on a high number of listings, but it’s not enough,” Mr McKibbin said.
“The fundamental undersupply of housing remains and the need to create new housing is urgent.“
According to Mr McKibbin, development delays will impact all markets including regional areas.
“The strain on supply experienced in some regional markets highlights the inadequacies of existing processes and as such, no ground is being made in improving affordability,” he said.Â
“The pure numbers make it clear that the state is not creating sufficient dwellings to satisfy current, let alone future, demand.
“Even as the market experienced a flurry of listings in late 2021, auction clearance rates remained at an extremely healthy 70 per cent-plus level week-on-week due to the weight of demand, and we expect this will resume in coming weeks.”
House prices to trend higher
Given the heavy demand across all of NSW, Mr McKibbin believes house prices will continue to trend upward over the course of 2020.
“Peak growth may have passed but we see the upward trajectory in prices to remain constant this year,” he said.
“Low rates and low supply make subdued, sustainable value growth for both houses and apartments a much more likely scenario than a correction.”
Mr McKibbin thinks there is still strong interest from both owner-occupiers and investors.
“Early signs for the year suggest the top end of the market continues to perform well while the more affordable markets remain attractive to first home buyers,” he said.
“Demand is strong across buyer profiles, as owner-occupiers remain active and investors are beginning to return to the market in greater numbers.
“While suburban factors will influence individual local markets, as they always will, across the board we expect small, sustainable price increases to characterise the market and vendors can be confident of achieving a strong price, while being mindful of the growth in value they have already enjoyed through the boom.”
Regional demand to continue
With regional markets outpacing the capital cities in terms of price rises and rental increases, Mr McKibbin doesn’t think there is going to be relief anytime soon.
“This year we expect regional vacancies to remain tight and select markets will struggle to accommodate the continuing influx of people,” he said.
“The pressure these markets have been under will continue this year. Many regional markets have been found wanting, unable to cope with the huge spike in demand resulting in considerable affordability challenges.”
Property to continue to foot the bill
With the soaring levels of transactions, stamp duty will be contributing $1 billion to the NSW State Government each month. Mr McKibbin believes it’s time for the government to put these stamp duty proceeds back into the industry.
“Despite this consistently enormous windfall, there remain some gaps in logic as to the government’s support for the industry on which it so heavily relies,” he said.
“For instance, rental moratoriums proved extremely damaging to mum and dad investors and yet landlords of some commercial premises must continue this support with rent waivers until July.
“The government’s plan is to take the financial difficulties of the tenant and transfer it to the landlord. It’s unreasonable to require a particular sector of the economy to take on a financial burden, especially when that sector is part of an industry contributing so much.”
