The Sydney Property Rollercoaster
The Sydney property market has experienced a rollercoaster of price changes over the past few years. To understand where we are heading, it is worth understanding the context behind current trends.
The Covid Downturn and 2021 Price Boom
The most notable change in the market in recent memory is the Covid-driven downturn. When the pandemic took hold in 2020, the market experienced a small decline of circa -3.1% between May 2020 and September 2020 (Source monthly CoreLogic Hedonic Home Value Index). Experts were predicting widespread price declines as the pandemic ripped through the country and the lockdowns caused business and social activities to cease. Remarkably however, the property market defied expectations and prices started to climb. Price increases gained momentum and in Sydney increased 25.5% in value in 2021 with house prices rising approximately $1,000 per day according to CoreLogic figures. The increase in demand for Sydney property was attributed to record low interest rates, the subsequent availability of credit and a change in lifestyles caused by the pandemic.
The Sydney property market began to lose steam in the second half of 2021 with property prices still rising but at a slowing pace. And as the affordability constraints began to catch up with property buyers, prices started to cool and trend slightly downwards in the beginning of 2022. Coinciding with the first interest rate rise in May 2022, the downward trend of property prices accelerated and we saw monthly price declines of over 1% consecutively every month for the rest of the year according to CoreLogic’s monthly Hedonic Home Value Index. During this time, borrowing capacities were being slashed. In only 12 months from May 2022 – May 2023, borrowing capacities decreased by up to 39% according to Shore Financial. The change in lending largely influenced the property price declines experienced in Sydney over 2022. Since the peak of January 2022 to the trough of December 2022, prices in Sydney declined by -13.8% according to CoreLogic.
2023 Price Rises
So far in 2023, property prices have risen by 4.8% across Sydney. A large contributing factor to the 2023 Sydney price rises is the lack of supply. Supply is down by 19.8% in Sydney week ending 4 June 2023, compared to the same period a year ago.
As reported in the Australian Financial Review, top property experts including Brian Redican, Chief Economist at TCorp are questioning the longevity of the price rises suggesting the increases are largely sentiment driven in the hope that the RBA is at the end of their rate hike blitz. He notes that sentiment can change very quickly particularly with affordability issues worsening.
Sales agents we are regularly speaking with are seeing an uptick in appraisals which could also relieve pressure on property prices. Ray White states in their latest property release, “critical appraisal numbers are up 62 per cent on two years ago and 22 per cent higher than last year”.
There is also a strong view, that price gains so far this year may not reverse, and we may just see a slowdown in price increases across Sydney according to another Australian Financial Review article. This sentiment is shared by the big banks including ANZ, CBA, Westpac and NAB. This view is supported by increasing migration figures and a shortage in supply. The annual growth in population in 2022 was 496,800 people as reported by the ABS, the highest rate of growth since 2009 and this trend looks set to continue, at least for the short to medium term.
Differing Expert Opinions
There are clearly differing opinions of what is going to happen next in the Sydney property market. This is also reflected in the media. One article headline in the AFR reads “Why rising house prices could reverse in the next six months” and the very same publication only a week later released an article titled “Higher interest rates unlikely to erase house price gains”. Whilst there is a range of different data and statistics to interpret, predictions will also vary. Also, different areas of Sydney will fare differently. Blue chip property buyers rarely face losses because blue chip property holds its value, even in a downturn.
Focus on Your Needs
It is important to be aware of the news and the market commentary, but it is equally prudent for Sydney property buyers to run their own race in trying to find the right property for their requirements. In areas where there is a shortage of supply, it is always challenging to find the right property. This means buyers should be scrutinising their own situation and basic needs in depth before considering the market conditions. Once they have found the right property, buyers should research the market dynamics, recent sales data and comparable sales results to be realistic about prices in today’s market. It can be disheartening to rely on prices achieved months ago whilst those rock bottom prices may no longer be possible. The key is to be up to date with market conditions and laser focussed on your needs.
Our Buyer’s Agency Can Help
As leading Sydney buyers’ agents for busy professionals, we can help you determine your requirements while navigating you through the ever-challenging Sydney property market.
Call our Sydney buyer’s agent today: Nick Viner, Principal Buyer’s Agent on 0405 134 645.