Sydney property prices continue to bounce

Sydney prices have now risen north of 4% in a matter of months, and for certain highly sought-after properties, that growth may be double that which would erase the price declines over the past 12 months. In an extraordinary turn of events, the low level of available property is well and truly offsetting the rapidly rising rate environment. Very few, if any, predicted that Sydney prices would be rising this year. Across our local regions, we’re seeing signs of buyer FOMO creeping back into the market as active buyers are witnessing properties being snapped up in a matter of weeks and at the top-end of price guides.

According to CoreLogic levels are currently running near 26% below the same time as last year and a whopping 32% below the decade average. This is a compressed market and in our regions, we’re experiencing a decline in availability north of 40%, which has placed selling conditions in favour of vendors. These conditions come despite the majority of borrowers having between 20-30% knocked off their lending capacity, not to mention a mortgage rate hovering at 6.5%, with the additional 3% APRA serviceability ‘stress test’ applied on top of that to secure a loan.

Given the tighter lending conditions, it’s a fair question to ask, who is driving this price growth? While we’re meeting with all walks of life at our open homes, it’s noticeable there is a high volume of downsizers active in the market. It was expected that baby boomers would start to crystalise their wealth that’s tied up in their larger homes and that is certainly unfolding across our region. We’ll often see this demographic place their focus on finding an appropriate and comfortable new home, rather than getting overly fixated on the purchase price. It’s certainly challenging for younger buyers to compete with these buyers as downsizers are less concerned about rates, will often be paying cash for the property and if the home suits, they can afford to knock off the competition.

We’re also seeing a new class of wealth emerge post-covid with quite a few individuals who have seen their financial capacity significantly increase. These buyers are very competitive when it comes to quality listings that are hitting the market and can afford to push a property’s value if they are emotionally engaged, or pushed by a competitor.

In addition to the above, there is the bank of mum and dad that fortunate families can tap into if required and our very typical buyer pool who just need to move for a range of lifestyle reasons. It’s not that there is a huge influx of buyers entering the market, if anything, mortgage approvals have been in decline for over 6 months, but there is a steady stream of movement that is ensuring all well-positioned properties will draw in an active audience. The drop in new listings entering the market makes it feel like buyer numbers are overinflated but it’s simply the outcome of fewer options to inspect.

The RBA’s most recent narrative is that rates will remain higher for longer and many expect the cash rate rising cycle will end up at 4.1%. That being said, the RBA’s past rhetoric and guidance has been as clear as mud, so we’ll all have to monitor a range of things from listings levels, the cash rate, inflation, migration, construction approvals, and the all-important consumer sentiment at ground level to make our best assessment. For now, prices are rising and demand is outweighing supply, but just when you think this is a reliable trend, nothing is surer than something coming along to tilt the axis again.