An interesting read in last Saturdays Sydney Morning Herald, stated that the “Sky’s no limit for Sydney property”. Reviewing the article, surprisingly it revealed that despite very strong recent growth the average price in Sydney for 2009 had only increased by 6% on the 2004 figure.

Over the last couple of weeks there have been a number of articles about the recent spike in property demand, the talk of Melbourne being in a property bubble and the general comment on interest rates.

Looking at the fundamentals of property, extrapolating from Westpac’s Chief Economist Bill Evans’ comments (at an industry economic update this week), the Australian economy is faring quite well on the world stage. Reports of this strength have stimulated buyer confidence (which had evaporated for much of 2008 & 2009) and the property market is surging to make up for the time lost in the first half of 2009, when buyers were sitting on their hands waiting for the property market to crash. According to Bill, Australia is undersupplied by approximately 180,000 dwellings with around 50,000 of these in NSW. Of this, Sydney has the lion’s share of current undersupply, while the high population growth in our city will put further strain on housing supply.

To turn this worrying trend around and make supply meet demand, it would take an additional 12 months of building at full capacity on top of what is currently occuring. However, in our local Northern Beaches there is neither a significant number of additional land (although a few blocks are being released in the not too distant future in Seaforth), nor a large number of high density developments. Consequently, we are unlikely to see any real shift in the supply side of the equation.

Until this additional development happens we will continue to see the long-term pattern continue, with premium prices being paid for prestige apartments, extremely strong competition for the entry level homes in our area & the general demand continuing to increase.

In marketing the ‘Tahani’ development in Ethel Street, Seaforth, we recorded over 1,000 potential buyers inspecting the apartments. This supports the theory that this area will need to cater for the baby boomers, who are now reaching retirement age and wish to secure the beachside lifestyle without the home maintenance that they have been dealing with for the past thirty-plus years.