Pent-up demand across Sydney’s property market has seen price increases outperform analysts’ forecasts, with an expert predicting 2024 could be “boom mode” for prices.
According to the Shore Financial State of Sydney Report, the past 12 months of growth have been even better than they initially predicted.
Shore Financial Chief Executive Officer Theo Chambers said looking at the price growth over the past 12 months reveals important clues about the current market.
“This time last year, the Sydney property market was in a fairly predictable place,” Mr Chambers said.
“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.”
The report found that areas like Hobartville, Dean Park, Casula, North Epping, Currans Hill, Elderslie, Enmore, Terrey Hills and Concord West were some of the areas that outperformed their expectations.
Mr Chambers 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,” he said.
“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.”
Mr Chambers said four factors contributed to that above-average growth.
“First, Sydney’s population has been rapidly increasing, largely due to external migration, which is pushing more people into the housing market and bolstering demand.
“Second, rental vacancy rates have remained ultra-tight and rents have continued surging, which has encouraged more people to switch from renting to buying – further increasing buyer demand.
“Third, rising prices have become a self-fulfilling prophecy: people are buying to get ahead of rising prices, which is causing prices to rise further.
“Fourth, while demand is elevated, supply is still quite low, even though quite a lot of new listings came onto the market over spring.”
He said these factors suggest there was more growth ahead.
“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,” he said.
“However, the reality could turn out to be very different.”
Mr Chambers said demand was likely to remain strong as it’s likely that external migration will remain high and the rental market will remain very tight and continue pushing people into the sales market.
“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,” he said.
“When you put all that together, there’s a reasonable chance the Sydney property market will be in boom mode in 2024.”
He said that where that might change is if the Reserve Bank kept pushing up interest rates, if unemployment spiked or if a surge of vendors listed their homes to take advantage of higher prices.
“If that happened, price growth would be much more moderate.”
