Property prices will rise
New levels of immigration, soaring rents and a slow-down in new listings are the three main factors are driving property prices in Sydney.
The Sydney housing market has turned the corner early this year with all major research firms showing an uptick in Sydney house and apartment prices over the last months, with apartments outperforming houses.
Respected property analyst Michael Yardney says this upswing in prices creates a window of opportunity for new home buyers to get into property as the Sydney market picks up again.
“Rather than trying to time your next property purchase based on where we are in the cycle, take a long view and if your income is secure and the time is right for you,” he says.
“This may be an ideal time to get a foothold in the Sydney property market while others are sitting on the sidelines.” 1
In addition, first-home buyers qualify for a range of government incentives, such as an exemption from NSW transfer duty – to see what support you could apply for download the information brochure here.
In its latest property forecast, Westpac says Australia’s housing recovery gained real traction over the three months to August 2023 – tipping a 7% growth in Australian property prices over the whole year.
“Australia’s housing market recovery appears to be on a much firmer footing,” said the bank.
“The lift since the start of the year has maintained momentum despite further interest rate rises, with surging migration continuing to be an important driver.
“The near-term outlook also looks more positive, Westpac assessing that interest rates have now peaked, and that the economic slowdown will be somewhat milder than previously forecast.” 2
Sydney is a fast-growing city
- Currently, there are 5.2 million people in Sydney;
- By 2050 the population of Sydney will be 10 million;
- Sydney’s lifestyle and economy attracts migrants;
- 400,000 new migrants arrived in Australia in 2022;
- Gov’t has pledged to attract more skilled workers;
- More streamlined visa system to be introduced.
Interest rate fears not realised
- The Reserve Bank is holding interest rates at 4.1 per cent;
- Fewer listings have been like a tent pole for house prices;
- New migrants move quickly from rental into ownership;
- Tight lending increases competition for affordable homes.
Rents are becoming unaffordable
- Sydney rent rise is the fastest in 20 years;
- Rents increased by 8.1% in June quarter;
- Annual rents now rising by 27.6%;
- Wages increased by 3.7% to March quarter;
- Vacancy rates in Sydney are now just 1.2%;
- Gap between renting houses and units is narrowing.
Buyers embrace apartment living
- Affordability constraints steer buyers towards apartments;
- Gap between house and unit value growth narrowing;
- Modern apartments offer a more complete lifestyle;
- Access to transport, jobs and schools is far superior;
- Apartments are a better value proposition than houses.
Eliza Owen, CoreLogic’s head of research, says first-home buyers are finding it difficult to get into the housing market due to low supply levels and surging property prices, but things could worsen in 2024.
“Property prices are expected to keep rising as interest rates stay on hold, and they could increase faster once interest rates start coming down next year,” she said.
Her advice? Save for a deposit and buy as soon as you can.
“First home buyers who can get into the market now may experience property value gains as real incomes rise in 2024, and there is modest easing in the cash rate towards the end of the year,” she said.
“This dynamic will also make it even more difficult for first-home buyers who are not able to get into the market over the next year.” 3
Source 1: Property Update
Source 2: Westpac House Pulse
Source 3: Australian Financial Review