Currently, Sydney property prices have risen by 8.3% compared to a year ago, surpassing previous peaks, with a median residential price of approximately AUD 1.11 million. The forecast takes into account the current market trajectory, predictions for housing supply, interest rate trends, and the impact of potential rate hikes.
Cameron Kusher, Director of Economic Research at PropTrack, stated that as the factors driving the increase in Sydney property prices have not weakened, the upward trend is expected to persist. Buyer interest is increasing, but there is a shortage of new housing supply, and the construction cost of new homes remains high, contributing to this year's surge in property prices. When considering the impact of inflation, the actual situation of rising property prices may be even more severe.
However, the forecast also points out a trend of a slight slowdown in the rate of increase. The primary reasons for this are the continued effects of interest rate hikes and expected rises in the unemployment rate, leading to a slowing of growth. While the Sydney market has shown resilience to interest rate hikes, the likelihood of ceasing rate hikes at present is low. Therefore, preventing further increases in property prices would require the construction of more housing and a significant increase in interest rates, both of which are challenging to achieve.
Another factor that may influence property prices next year is tax reduction policies benefiting higher-income earners, starting from mid-2024. A reduced tax burden may make high-income individuals feel wealthier and encourage them to invest additional funds in the real estate market.
It is noteworthy that even with interest rate hikes and reduced borrowing capacity, first-home buyer volumes in New South Wales continue to grow. It is expected that the rise in prices will not deter the pace of first-time homebuyers, as the government has provided support, and those with the means will be eager to exit the rental market.
Despite the ongoing rise in Sydney property prices, the rental market also faces serious challenges. Rental market tightness reflects Australia's housing shortage issue, and with the tight rental market and robust rental price growth, this may continue to cushion the decline in property prices. Rental prices are expected to continue rising in the next 12 months, mainly due to tight supply and immigration rates slightly slowing but still exceeding long-term expectations.
