- Demand continued to be heaped onto the market from multiple perspectives.
- While new listings increased, the uptick was still far outweighed by demand.
- Next year may be more of the same, except for a few circumstances that could see demand fall.
Initial forecasts for Sydney house prices in June 2023 have fallen short, with Sydney property price growth coming in above expectations.
While the Shore Financial State of Sydney report and forecast for December 2022 was largely in line with observed price movements, the June 2023 edition saw more deviation between the forecast and actual results.
Sydney property market asking prices\
Shore Financial CEO, Theo Chambers, said the June 2023 analysis did not capture how much pent-up demand there was in many suburbs, and as such, locations significantly outperformed the forecasts.
“This time last year, the Sydney property market was in a fairly predictable place. We’d had a large boom during the pandemic, that had been followed by a correction, and it seemed like the market might fall a little more before entering a period of moderate growth. That’s largely how things played out,” he said.
“Six months ago, the Sydney property market was in a state of flux. It was hard to tell if demand was being artificially propped up by low housing supply or if it was the result of genuine buyer interest. As a result, the data seemed to suggest that we could expect moderate rather than strong price rises. In reality, though, it turned out that more Sydney suburbs were in growth mode and at higher rates than expected.”
Four reasons why Sydney house prices soared
- Rapid population growth,
- Renters choosing to buy instead,
- Rising prices mean people want to buy before it gets too expensive, and
- A dearth of supply remains.
Chambers explained that Sydney’s population has been rapidly growing, with external migration playing a significant role. This all heaps demand onto the market.
Renters are also fed up with ultra-tight vacancy rates and surging rental prices, with Chambers noting those factors encouraged renters to buy instead, also adding to housing market demand.
Sydney rental market vacancy rate
The third driver of demand and Sydney real estate price surges was a “self-fulfilling prophecy, noted Chambers.
“People are buying to get ahead of rising prices, which is causing prices to rise further,” said Chambers.
Finally, he observed that while demand remains elevated, supply continues to substantially lag, even though a new listings uptick was seen over spring.
Sydney real estate market stock levels
Sydney property price predictions for 2024
“When you study all these data points and indicators, it gives us clues about what we can expect from Sydney prices in 2024,” said Chambers.
“A lot of people felt that with interest rates elevated, unemployment rising and Sydney’s median price close to a record high, we’d see only limited price growth next year.
“However, the reality could turn out to be very different.
“Demand is likely to remain strong, because it’s likely that external migration will remain high and that the rental market will remain very tight and continue pushing people into the sales market. At the same time, the supply of new listings is likely to remain constrained, because that’s been the trend in recent years and there’s nothing to suggest that will suddenly change.
“When you put all that together, there’s a reasonable chance the Sydney property market will be in boom mode in 2024.”
Theo Chambers, Shore Financial
“Where that might change is if the Reserve Bank of Australia (RBA) keeps pushing up interest rates, if unemployment spikes or if a surge of vendors list their homes to take advantage of higher prices. If that happens, price growth would be much more moderate.”