In the most recent CoreLogic RP Data Home Value Index, a remarkable turnaround for Sydney's median dwelling growth was recorded. Where in previous months the year on year gains had slowed down to around 7 per cent, in May this jumped back to 13.1 per cent.
It means that throughout the previous quarter, values increased by 6.6 per cent, and in May alone they went up by 3.1 per cent. This is extremely fast growth, especially compared to other cities (bar Melbourne). But why has this occurred, and does it mean high capital gains should be back on the radar of Sydney property investors?
An active environment
The Reserve Bank of Australia's cash rate cut will undoubtedly have had an impact on Sydney. With the rate cut to 1.75 per cent and many lenders immediately following suit, investors have been given an opportunity to lock in near-historic low interest rates, increasing their borrowing power.
While specific data on lending since this cut is yet to be released, it seems likely that both investor and owner-occupier lending will have seen a sharp increase in the last few months, which in turn can drive up demand – and values.
Is there enough supply?
Another reason that would explain the severe growth in Sydney over the last month would be demand outstripping supply. However, recent figures from SQM Research have noted "abnormally" high listings for the New South Wales capital.
"Buyers now have much more choice."
"Stock on market has materially increased for Sydney, indicating the slowdown is still occurring in the market. Buyers now have much more choice of homes compared to this time last year," added SQM Managing Director Louis Christopher.
These may have dropped off significantly in the last six weeks, which could be the platform from which values have risen so sharply in a short space of time.
Long–term gains still the goal
Regardless of the current market spike, it remains clear that returns on property investment are still extremely attractive for buyers. CoreLogic RP Data research from June 6 highlights the total returns on investment in the year to May, which sit at 16.9 per cent for Sydney. Over the previous five years, the return on initial investment has increased by 85.3 per cent in the city.
Finding property growth markets and investing in them is a long-term process, with significant gains up for grabs. To understand how to make the most of the market, get in touch with The REIN Group to book in for one of our property seminars.