Now is The Time to Get Into The Sydney Property Market
The Reserve Bank’s decision to cut interest rates is good news for mortgage holders but even better news for first-home buyers.
For thousands of people agonising about whether or not to enter the property market this week’s move by the Reserve Bank to cut interest rates to 4.1% was a moment of great significance.
While the cut is a modest one, commentators say it will do much to boost confidence in property – triggering a future upswing in prices.
“The most important thing about the rate cut is the lift in sentiment,” says CoreLogic’s research director Tim Lawless. [1]
“And we know historically that consumer confidence and housing market activity are generally closely correlated, so we should see more buyers becoming active.”
CoreLogic estimates the rate cut will slash about $121 a month from typical $750,000 mortgage, while boosting the borrowing capacity of a new buyer by a handy $13,000.
Mr Lawless says that even a modest cut in interest rates will help to boost consumer confidence and in the short-term stabilise property values.
“Historically there has been a clear relationship between changes in consumer sentiment and home purchasing activity,” he said.
Tom Forrest, chief executive of Urban Taskforce, says the RBA’s decision to cut interest rates was a “sigh of relief” after 13 successive rate rises between May 2022 and November 2023. [2]
“The decision to lower the cash rate immediately puts more money into the pockets of mortgage holders,” he said.
“This flows onto the entire economy, but it also adds to the borrowing capacity of new home buyers, as well as easing the financial burden of holding costs while new homes are being constructed.”
Mortgage applications on the rise
Many first-home buyers and investors began eyeing up suitable property well ahead of the RBA’s decision to cut interest rates, with data showing a significant increase in new mortgage applications at the end of 2024. [3]
Growing demand coupled with a chronic shortage of new property is fuelling a growing sense of optimism about property, with KPMG tipping Sydney unit prices to grow by 11.1% over the next two years. [4]
KPMG’s latest Residential Property Market Outlook also predicts that prices for units (a category which includes apartments and townhouses) will outpace house prices over the same period.
“The shift will be largely driven by ongoing affordability constraints, particularly in capital cities,” according to the report. “As a result, there will be growing demand for units, as a more affordable housing option.” [5]
Analysts say that whatever happens to interest rates over the next few months – there is hope of further cuts – Sydney property prices are still underpinned by a lack of new housing and a tortuous planning system.
Brendan Woolley, a director at property research agency Charter Keck Cramer, says that NSW is falling well short of its annual construction targets set out in the federal government’s National Housing Accord.
“Under the accord 35,000 new apartments need to be delivered in Sydney each year, but our forecasts indicate that on average only 10,000 per annum will be completed over the next three years,” he said.
Given these conditions, Mr Woolley says there will be a growing demand in Sydney for high-quality apartments which are well located and offer a good range of shared amenities – a finite resource in NSW.
“Savvy buyers are doing their homework,” he says. “They are looking for trusted developers with a good track record as well as accessible locations that are likely to perform strongly over the long-term.”
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Sources:
[1] AFR
[3] Australian Financial Review
[4] KPMG
[5] Daily Telegraph