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Tale of two cities in property cycle

On Aug 25 2015

Sydney’s and Perth’s positions on the property cycle underline the importance of taking ...

Sydney’s and Perth’s positions on the property cycle underline the importance of taking a long-term view to real estate investment, according to leading real estate network, LJ Hooker.

While an array of metrics affect markets, supply and demand represents the greatest driver of the property cycle, said the leading real estate network.


LJ Hooker’s National Research Manager Mathew Tiller said while the last 12 months had produced ‘red hot’ results in Sydney and challenges in Perth, both had experienced market ebbs and flows over the past 10 years.


Between 2004-2008 Sydney’s property market contracted as a result of rising unemployment and flat population growth.


“There were simply too many homes on offer than were needed in Sydney at the time,” said Mr Tiller.

“Today’s buyers might think it unbelievable that prices could go backward, but that was the reality in Sydney from 2004-2008, when the median dropped from $498,000 to $493,000.


“But on the other side of the country, the property cycle was at a different point. WA’s market couldn’t keep up with the additional 250,000 residents chasing employment in resources and mining. Median property prices almost doubled from $230,000 to $445,000 and by as much as 30% per annum in regions such as the North West.


“Fast forward to today and it’s a tale of two cities, with Sydney’s supply unable to meet demand created by record-low interest rates and lower unemployment; while mining investment in WA has slowed and population growth declined.” 


However, Mr Tiller said the long-term view was critical to real estate transactions.


“Savvy buyers and sellers look beyond the immediate conditions, recognising opportunities in all phases of the property cycle. Indeed, in some instances, counter-cyclical transactions can yield the highest results.

“But real estate should be viewed as a long term investment.  And despite the rises and falls of property cycles, capital city markets generally move on an upward curve.”


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