Sydney residential property market update

Not so long ago many market participants were wondering how deep and prolonged a housing correction would be



It has been pleasing to see the resilience of Sydney’s residential property market, both from our perspective as a lender and our borrowers’ perspective.

This short note focuses on the Sydney residential property market – a large segment of the Aura Group Property Credit book.

Not so long ago many market participants were wondering how deep and prolonged a housing correction would be. Instead, the market has benefited greatly from the continuing rebound of the Australian economy. Buoyed by unprecedented Government stimulus, record low-interest rates, and moderated expenditure e.g. less travel, the household savings ratio is at levels not seen since the 1980s. This additional capacity coupled with pent-up buyer demand is a big driver of the current property boom. An additional tailwind is anticipated from next year and beyond, as international migration levels normalise.

We also believe the current bull/boom market has legs, considering house prices and house price-to-income ratios remain similar to prior peaks. However, since the last peak, mortgage rates have reduced and there has been modest income growth over the period. These tailwinds contribute to increased borrowing capacity and the very strong clearance rates seen at hotly contested auctions week after week.

While we expect house price growth to continue over the short/medium term, we anticipate this may moderate as more listings hit the market to take advantage of booming conditions. Further, APRA and the RBA may step in as they have in the past, with macro-prudential controls to slow housing lending.

In consideration of these points, we are overall optimistic over the short/medium term and thus have recently improved the attractiveness of Aura Group’s property debt terms. This has led to an influx of loan requests for commercial property purposes, to refinance existing debt, as potential clients benefit from improved and refreshed valuations, and borrowers look to add to their commercial property portfolios. The Aura Group Property Credit Team has expanded to manage increased deal flow, ensuring we remain nimble and deliver the short application to settlement timeframes.

Please note: Aura Group lends in all metropolitan regions and against numerous commercial property asset classes.

Important information

This report is provided to accredited, qualified, institutional, wholesale and sophisticated investors for information purposes only by Aura Funds Management Pty Ltd (ABN 96 607 158 814, Authorised Representative No. 1233893 of Aura Capital Pty Ltd AFSL No. 366 230, ABN 48 143 700 887). Aura Funds Management Pty Ltd is the Trustee of all the Funds mentioned and a subsidiary of Aura Group Pty Ltd.

Any financial product advice given in this report is of a general nature only. The information has been provided without taking into account the investment objectives, financial situation or needs of any particular investor. Therefore, before acting on the information contained in this report you should seek professional advice and consider whether the information is appropriate in light of your objectives, financial situation and needs. Aura does not guarantee the performance of its funds, the repayment of any capital or any rate of return. Investing in any financial product is subject to investment risk including possible loss. Past performance is not a reliable indicator of future performance. Information in this report is based on the information provided to Aura by third parties that may not have been verified. Aura believes that the information is reliable but does not guarantee its accuracy or completeness. Aura is not able to give tax advice and accordingly investors should obtain independent advice from an accountant and/or lawyer before making any decision based on the tax treatment of its investors. You must read the Fund Fact Sheet or Information Memorandum and seek professional advice before making a decision to invest in any of the funds.

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