SQM climbs aboard Sydney house price rocket

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SQM Research released its weekly newsletter last night in which managing director, Louis Christopher, embraced Sydney’s rapid house price inflation:

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Each Tuesday, SQM Research updates our vendor asking prices index, which was released earlier this year. So far, we have been happy with the way the index has been tracking compared to the ABS house price series. As can be seen above, the Index at the capital city level has recorded a recovery in real estate prices this year and from what can be observed in this current December quarter, it appears the recovery is continuing onward. In the last 90 days, we have recorded house prices up by 3.6% and units up by 1.7%.

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When looking at the current hottest market (Sydney – see chart above), asking prices continued to climb last week. Upon speaking to some trusted agents on the ground in Sydney, quite a few are reporting that would be buyers are becoming increasingly disenchanted with the market with some walking away in frustration. Well, this is what happens in rising markets. Those who come to the upswing later on become angry they have missed out on the gains that have already taken place. In frustration they avoid the market in the hope and self-expectation that the market will soon return to their acceptable price.

But often, it doesn’t. It keeps going. And for now I firmly believe that it was is going to happen in Sydney. There is no flattening out or “peak growth” taking place or softening as some of my competitors have voiced in the last week. There is perhaps a seasonal lull as one normally gets this year for the capital cities. Quite frankly it’s a little sad and bemusing to see that my fellow analysts are unable to work out the difference between normal seasonality and a real change in trend in the market.

Who can blame young buyers for being disenchanted? With a median house price in Sydney of $749,500 and a median unit price of $521,500 (according to Residex), the Australian Government endorsing unaffordable housing, the RBA stoking a blowoff in speculation, FIRB using a slice of swiss cheese to police foreign investors, and state and local governments doing nothing to free-up supply, anger is an entirely appropriate response.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.