Property listings in the 'Emerald City' have skyrocketed as investors cash in their housing assets, preparing to pump the funds into superannuation and take advantage of tax changes.
The number of properties coming onto the market in Sydney in January rose by 100 per cent, and 200 per cent in Sydney and its regions, figures from property group Raine & Horne offices show.
In many areas, the flood of listings reflects transitional changes to superannuation, which allow up to $1 million in after-tax contributions to be made prior to July 1, 2007.
Proprietor of Raine & Horne Newtown, Ben Treweeke, in Sydney's inner west said the changes are having real impact on the property market in the area.
"We've sold a lot of management properties for people who are moving their money into superannuation," he said.
"Indeed rent rolls across the board are relatively static because every time we take on a new management property, we're also selling one."
Under the federal government's new super regulations, money received from a taxed super fund will be tax-free for people over the age of 60, making it the most tax-effective investment for retirement.
At present, money is taxed when put into a fund, while within a fund, and generally when withdrawn.
But once the new laws are in place, an individual will be limited to investments totalling $150,000 a year or a maximum $450,000 within a three-year period.
Mr Treweeke believes the shift to super can also be partly attributed to low rental yields.
The Real Estate Institute of Australia (REIA) said the supply of rental property is tight because of investor selling to take advantage of other investment opportunities like super.
However, with rental returns now improving due to tight supply of rentable property investor interest in property could be reignited.
"Increases in rents are not just a market response to tight vacancy rates, but also to yields," REIA president Graham Joyce said.
"It has been suggested that this is a one-off event and will ease after June."
However, given that investors will be able to shift up to $450,000 within a three year period into super after June, the REIA predicts that the sell-off of residential investment property will continue.
So will the market continue to be flooded in coming months?
Chief executive officer of Raine & Horne, Angus Raine, thinks not.
"There will not be a flood by any means," he said.
About 85 per cent of property owners hold one property, meaning there's only a small percentage of property owners that will have the capital to put into super.
"This selling is going to free the market up ... and really bring down the ceiling for first time home buyers," he said.
Mr Raine said the availability of property in Sydney areas such as Bondi Beach, Bondi Junction and Potts Point - traditional investor areas - is increasing.
In Sydney's north, Raine & Horne salesman David Hill says there are more investors selling than homeowners, with one and two bedroom apartments in the $350,000 to $500,000 range being snapped up by first homebuyers.
Mr Raine said the unprecedented rise in listings could dampen property prices temporarily.
But it could also fuel the rental crisis further by reducing the stock of rental homes available, because the majority are being purchased by owner occupiers.
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