Rising rents in Sydney and an oversupply in the outer suburbs has left a tale of two markets - one with a booming population crammed into available units, and one with vacant homes and open but expensive land. A drop in interest rates could start leading to some market changes, though, and experts are saying now is the time to buy.
Interest rates dropping below expectations, a world financial crisis and a shaky consumer confidence have made predicting what happens next in the New South Wales market a difficult task. But for investors, it should be about the bigger picture. In this state's case, it comes down to supply and demand, say experts.
"When you have a period of volatility, you've still got to look at the long term trends," says Malcolm Tyson, chief executive for Colliers International NSW. "The long term trend shows that there is a severe decline in the number of new residential construction projects, and yet you've still got an increasing population growth."
Immigration and a rising birth rate have both played a part in this increase in residents. Without the funds to do it, the building supply in the key areas of the state is not likely to increase anytime soon. At the same time, there are no experts predicting demand will wane either.
"Those two curves on the graph are really diverging apart at a rate they've never really done before," says Tyson.
Pino Tedesco, the Sydney director of Metropole Property Investment Strategists, agrees.
"The supply is fixed here," he says. "It's not like out west where you've got a lot of land."
That makes now the time to buy, says Real Estate Institute of New South Wales CEO Tim McKibbin. With the recent decreases in interest rates, capital is getting cheaper, he says.
"I think there's people who have been looking to get into the market can do it now," he says. "It's likely we'll see prices increase soon, as more people are cashed up."
Tedesco says those wanting to get into the market shouldn't wait too long. "Experienced investors have seen this before and know it is a good opportunity to buy," he says. "The investors that aren't buying are probably the ones who will get into the herd when it's too late."