The Sydney property market was supposed to be taking a breather in 2016, right? Well, no, not as it’s turned out.

After a very brief lull at the end of 2015, and in the lead-up to the Federal Election, the Sydney market has built up a head of steam once again. In fact, it’s on track to record another year of double-digit growth.

According to the Domain Group House Price Report for the June quarter, lower interest rates have bolstered buyer confidence and Aussies are getting back out into the market, hunting for homes and investment properties.

The revival of market activity means that Sydney prices are on the rise (yet again) and the median house price has bounced back up over $1 million.

At $1,021,968, prices are up 2.4 per cent compared to the last quarter. And it’s not just house prices climbing, median unit prices have also increased and are now at $669,830 – up 0.6 per cent on the last quarter.

Some property experts have been left scratching their heads pondering why the slowdown that they forecast didn’t actually materialise.

After three years of solid growth, many pundits presumed that with such extraordinary price growth as well as intervention by the Australian Prudential and Regulatory Authority (APRA) late last year, then the Sydney market would cool down. Well it did briefly.

The main problem, according to those in the know, is that there still remains a huge undersupply of property on the market in Sydney. Even though there has been plenty of media about an oversupply of new units, they are just a small part of a much bigger story.

More people are shifting to Sydney than are leaving and the types of properties they want to live in are just not being built or being sold.

Baby boomers are reportedly holding tight on to their long-term homes, because the type of property they want to downsize into just aren’t being constructed. They’re simply not interested in units designed for the investor market – so think, smaller floor plans and often in inferior positions.

The Real Estate Institute of New South Wales in particular believes that the extraordinarily high cost of stamp duty, which has soared to about $40,000 on a median priced Sydney property, is acting as a major impediment. Many would-be sellers are simply deciding that the costs to sell and buy again are not worth the effort so they’re staying put. This of course is reducing supply and driving up prices even further.

What will the next few months bring? Well, probably more of the same, with prices continuing to rise and more first homebuyers locked out of the market.

But more and more would-be investors are considering buying in another part of the country as a way of getting a foothold in the market – somewhere – and continuing to rent wherever they want to live.

In fact, the latest research from the Property Investment Professionals of Australia found that investors across the nation are considering Brisbane as the next investment location.

The 2016 PIPA Investor Sentiment Survey found that 50 per cent of investors believe Brisbane offers the best investment prospects – with the city remaining far ahead of any other capital cities and especially Sydney, which was on the radar of just 11 per cent of investors.

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Nicola McDougall

Nicola McDougall

Nicola McDougall is an award-winning journalist, property investor, and former editor of Australian Property Investor magazine. She is also a successful lifestyle blogger, likes writing movies "in her spare time", and is a novice surfer tragic.
Nicola McDougall

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