The economic environment in NSW has remained relatively healthy with the economy expanding by 1.7% over 2009/10, supporting house price growth of 5.7% over the year to November, although interest rate rises have tempered price growth more recently. Fundamental conditions in the Sydney housing market remain tight, with dwelling completions running at a meagre 26,000 (around half the levels of a decade earlier), well below underlying requirements. Indeed, the chronic NSW housing shortage will continue to accumulate to remarkable levels. We expect competition in the rental markets to intensify, with vacancy rates forecast to head below 1% in the second half of the year.

(ANZ Housing Snapshot Jan 2011)