Image – Canva
  • Along with rising interest rates, natural disasters and a rise in Covid cases could make the end of 2022 interesting
  • House values in Sydney are down by more than 10% since peaking in January
  • The implementation of changes to stamp duty for first home buyers could also make an impact next year

With house prices falling – Sydney’s median house price has already fallen by more than 10% since peaking earlier in the year – and rising interest rates, coupled with natural disasters and a rise in Covid cases, it is expected to be an interesting end-of-year for the housing market.

After peaking in January, weekly asking house prices in Sydney declined over several months, however, have remained relatively stable during the past few months with a small rise so far this month, according to SQM Research.

Asking prices for units have remained relatively steady in comparison to houses.


[Select part of the chart to zoom in on various years, and ‘reset zoom’ button to return]

Stock on the market has increased compared to last year, however, still below levels seen in 2018 and 2019.


[Select part of the chart to zoom in on various years, and ‘reset zoom’ button to return]

CoreLogic has noted that Sydney home values are down -10.2% since their January peak, following an extraordinary 27.7% rise.

“The pace of falls has eased over the past two months across Sydney,” noted Tim Lawless executive research director of CoreLogic’s Asia-Pacific research division.

Tim McKibbin, CEO of the Real Estate Institute of New South Wales (REINSW), said that while on one hand he expects the property market to continue as is, two familiar external factors could have a dramatic effect on the property market this December.

“While we can expect transactional activity to mirror recent weeks past, regrettably the real estate market in the weeks to come may be shaped by two familiar but unwanted influences: natural disasters and COVID,” he said.

“The NSW Government has already signalled the potential return of COVID-safe measures in light of the new wave of infections.

tim mckibbin
Tim McKibbin. Image supplied.

Mr McKibbin said that accordingly agents will need to be vigilant and ready to adapt to any operating procedure changes.

“The REINSW will remain in close contact with Health officials to ensure members remain aware of their roles and responsibilities,” he said.

Flooding concerns

Mr McKibbin noted the dramatic impact of flooding right across the state, in conjunction with other impending natural disasters, which is set to worsen the availability of housing stock.

“Housing is an essential commodity and recent natural disasters are having a major impact on the state’s housing market.

“Owner-occupiers and tenants in affected areas have a very difficult time ahead.

“So too do property managers. Property management is extremely stressful work and the recent experience of property managers, through COVID, fires and floods, has resulted in a dramatic exodus of people from the industry.”

Impact of Stamp Duty reform

Another elephant in the room is the impending implementation of the state government’s stamp duty reform, which will occur in January, and may result in some buyers and investors delaying purchases until they see the impact this makes on prices. This is despite eligible first home buyers

The reform, which allows eligible first-home buyers to choose between paying a lump sum or an annual land tax, has been welcomed although Mr McKibbin noted that replacing one tax with another is not necessarily addressing housing affordability concerns.

Theo Chambers, CEO of brokerage Shore Financial, said the reform is a great initiative as it almost halves the minimum required amount first home buyers need to save as a deposit.

“There is a significant portion of Australians who can afford the repayments of a home loan, however, don’t have enough savings to cover the required minimum deposit and stamp duty,” he said.

“This helps all those individuals get into the property market sooner.

“The annual property tax only works out to cost more than once-off stamp duty after roughly 14 years if you assume 2.5% growth on land value per year.

NSW Stamp Duty Compared to Land Tax of $500 + 0.3% p.a

stamp duty reform imapct
Source – Shore Financial

“Some first home buyers are limited on their maximum purchase price based on their savings and deposit, whilst others are limited by income and serviceability,” continued Mr Chambers.

“While this significantly assists those restricted by their savings or overall deposit, it will not be helpful for those restricted by income as this annual tax will further reduce their borrowing power.

Shore Financial CEO Theo Chambers
Theo Chambers. Image supplied.

“In saying this, most first home buyers we deal with are restricted by deposit, not income and those who have the appropriate deposit, can still opt in for paying the stamp duty upfront.”

In terms of what he expects to happen to the market, he noted that more investment properties are needed to provide housing for tenants.

“Investors already have compressed yields with high interest rates, and are dealing with holding costs increasing at a much higher rate then rental yields.

“On top of this, there is a substantial lack of properties available to rent at present, plus a significant housing shortage across NSW. This would only further worsen both these problems.”

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