The Sydney Property Market – October 2024

2024 has seen a further continuation of growth for the Sydney property market, defying initial forecasts amidst a backdrop of escalating interest rates and mounting cost of living pressures. Performance has however varied by area. A key driver of the market growth has been the persistent gap between buyer demand and available properties, with active buyers consistently outnumbering listings in many areas we operate. Auctions for quality properties in sought-after areas have been particularly robust, with competition often driving prices significantly above agent-quoted price guides.

Looking ahead to the remainder of 2024, we anticipate further growth during the spring season, albeit at a slower pace.

Despite lingering inflation, many experts are still predicting an interest rate reduction later this year or early in the new year, and immigration levels are expected to remain high. We foresee the supply shortage persisting our areas of operation (east, north, inner west and northern beaches), which should sustain demand and uphold market prices.

Sydney property market statistics

Growth figures

According to the CoreLogic RP Data Daily Home Value Index as of 30 September, 2024, Sydney dwelling values have increased by 4.5% year-on-year and 0.2% month-on-month (September 2024). When examining houses specifically, the growth rates are 4.9% year-on-year and 0.1% month-on-month. Units have shown lower year-on-year growth at 3.5% but have performed better month-on-month with a 0.6% increase.

In comparison, across Australia, the strongest growth for dwellings has been observed in Perth, with a 24.1% increase year-on-year and a 1.6% rise month-on-month (September 2024). Melbourne has overtaken Hobart as the weakest market, experiencing a -1.4% decline year-on-year and a -0.1% drop month-on-month. Melbourne is followed closely by Hobart.

Sydney dwelling values are currently at a record high. The current median price for houses is $1,473,775 and units $860,849.

Auction clearance rates

2024 began on a strong note, with clearance rates in the first couple of months hovering in the late 60s to early 70s percent range. However, as the year has progressed, these rates have weakened, generally settling around the low to mid-60s.

It’s important to note that the clearance rate figure is an average across all suburbs in Sydney and does not necessarily reflect the market’s strength or weakness uniformly. For instance, the clearance rate in a desirable suburb may (and usually does) differ significantly from that in a less sought-after area.

Sydney property market - a graph showing the strength of auction clearance rates in Sydney

Interest rates

Since May 4, 2022, the Reserve Bank of Australia (RBA) has implemented a staggering thirteen interest rate hikes, raising the rate from a historic low of 0.1% to the current 4.35%, the highest level in twelve years. These increases were aimed at curbing inflationary pressures.

During its meetings in July, August, September, and October 2023, the RBA maintained steady rates. However, the November 2023 meeting saw a 0.25% increase. Since then, rates have been held steady at 4.35%.

The RBA remains vigilant, committed to bringing inflation back to target within a reasonable timeframe. The latest Statement on Monetary Policy released in August 2024 states:

“The Board will rely upon the data and the evolving assessment of risks to guide its decisions. In doing so, it will continue to pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

The next RBA Statement on Monetary Policy, released 4 time each year is due for release in November.

Rental vacancy rates

According to the most recent Domain Rental Report for the June 2024 quarter, Sydney house rents have remained steady at a record high median of $750 per week, unchanged from the March quarter. This marks the first time in 18 months that median house rents have not increased. Domain suggests that rental conditions may be easing, as this result represents the weakest June quarter since 2021.

In contrast, unit rents have increased by 2.9% during this quarter, reaching a record median of $720 per week. However, the pace of quarterly growth is nearly three times slower than the record growth observed in June 2023. Annual gains have also decelerated significantly, nearly four times slower than the previous year’s record-breaking 27.6%, now standing at 7.5%.

While this stabilization is a positive development, a significant increase in supply is necessary before tenants can expect any substantial relief.

The main factors affecting the Sydney property market

The shortage of available properties remains a challenge, with buyers still outnumbering sellers in most areas we operate. Unfortunately, although there has been an uptick in spring listings, there is little indication that this supply shortfall will be resolved.
Buyer confidence is reasonable, buoyed by a recent slowdown in interest rate hikes and optimistic forecasts from various experts predicting a potential rate cut later this year or early next year.
The Sydney market has also seen a resurgence of overseas buyers, coinciding with a notable increase in immigration following the prolonged border closures during the pandemic
In response to housing pressures, the Federal Government has announced two key measures: a temporary reduction in immigration figures in the short term and increased taxes on overseas buyers who leave their properties vacant.
First-time homebuyers are re-entering the market, particularly at the lower end, with a strong focus on apartments. This trend is being driven by significant rental price increases, making the prospect of purchasing a home more financially appealing.
Investor activity is mixed; some investors are selling due to rising mortgage repayments, while others are capitalising on the tight rental market, drawn by the prospect of increasing returns.
The NSW Government has unveiled extensive rezoning plans for Sydney, particularly near transport hubs, to facilitate the creation of a substantial number of new dwellings, primarily apartments, aimed at alleviating housing pressures across the region.

Where to from here?

In recent years, the Sydney property market has become increasingly challenging to predict, influenced by a complex mix of global and domestic factors.

Events such as COVID-19 lockdowns, the Ukraine conflict, inflationary pressures, and rising interest rates have all played significant roles. Additionally, ongoing stock market volatility and potential new international tensions, including in the Middle East, add further layers of uncertainty. These dynamics contribute to the difficulty of forecasting future trends in the property market.

However, despite these uncertainties, the fundamental drivers of the Sydney property market—limited supply and strong demand—remain firmly in place. We believe these factors will continue to support market growth through the end of the year.

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