Sydney’s property market ended 2018 in ‘reset’ mode. Falling property prices, lower auction clearance rates and ample stock had turned a seller’s market into a buyers one. Tighter lending restrictions added fuel to the fire even though caps on interest-only loans have been eased in response to the downtown in the market. Add to this the Banking Royal Commission and a looming State and Federal election and it leads to a lack in buyer confidence coming into 2019.

Its not all doom and gloom however. Trent Wiltshire, economist at Domain and author of their Property Price Forecast Report suggests that 2019 will be a year of greater stability. He believes that prices may fall in the early part of 2019 but at a slower pace before the market moves into a phase of gentle growth.

‘Sure the extraordinary house price growth Sydney has recorded over the last property boom is clearly now receding, and dwelling prices have fallen’ he says,’ but this has to be put into context with the spectacular growth Sydney experienced over the previous 5 years. This is no property crash. There are no forced sales by desperate vendors, instead we’re seeing an orchestrated slowdown created by our regulators who’ve tightened the restrictions on lending, particularly to investors’.

The factors that make the Inner West so desirable – excellent public transport, some of Sydney’s best schools and universities, a well-established gourmet and café scene, beautiful parklands and easy access to the city have not changed and will still draw buyers to the area. Well located “A Grade” homes and “investment grade” properties are still selling well but secondary properties, which in the past would have been snapped up by eager buyers scared of missing out, need to be priced well to achieve a sale.

The good news is that property generally has become more affordable attracting new buyers to the market whilst solid population growth, low unemployment and low interest rates will underpin Australian property price growth in the medium term. While more restrictive lending conditions will continue to weigh on prices in the immediate future, eventually borrowers will begin to adjust to this new normal (including having a better understanding of how much they can borrow and how long it takes to secure a loan) and lending will begin to grow again, although at a modest pace.

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