The Sydney Property Market – December 2024

The Sydney property market experienced growth through most of 2024, defying initial forecasts. However, as the year progressed, momentum began to slow. Clearance rates have weakened, and monthly growth figures have shifted into negative territory, signalling a softening in the market. For the first time in quite some time, buyers have had more opportunities to secure properties at more favourable prices.

Market performance, however, has varied across different areas. Auctions for quality properties in sought-after locations have generally held up best, with competition occasionally driving prices well above agent-quoted price guides. (although this can also be attributed to the continuing and persistent practice of agent underquoting).

Despite lingering inflation, many experts are still predicting an interest rate reduction soon, and immigration levels are expected to remain high. In our areas of operation (east, north, inner west, and northern beaches), a significant increase in supply appears unlikely in the short term, which should help support market prices.

Sydney property market statistics

Growth figures

According to the CoreLogic RP Data Daily Home Value Index as of 30 November, 2024, Sydney dwelling values (houses and units combined) have increased by 3.3% year-on-year and -0.2% month-on-month (November 2024).

When examining houses specifically, the growth rates are 3.5% year-on-year and -0.4% month-on-month. Units have held up better than houses in the latter part of 2024. Year-on-year growth for units is 2.6% and 0.2% month on month.

In comparison, across Australia, the strongest growth for dwellings remains Perth, with a 21.0% increase year-on-year and a 1.1% rise month-on-month (November 2024). Melbourne has overtaken Hobart as the weakest market, experiencing a -2.3% decline year-on-year and a -0.4% drop month-on-month. Melbourne is followed closely by Hobart.

Sydney dwelling values are now -0.5% below the record high which was in August 2024.

It’s important to recognise that these figures represent average values across Sydney as a whole and do not accurately capture the conditions or trends in specific suburbs or local areas. Real estate markets can vary significantly from one area to another, with some experiencing higher demand, faster growth, or unique market dynamics. Therefore, these averages should be used as a general guide rather than a precise reflection of every suburb’s property market.

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, settling around the low 60’s

Similarly to the market growth rate figures, it’s important to understand that the clearance rate represents an average across all suburbs and does not uniformly reflect the strength or weakness of the market.

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 November 2024 states:

“Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remain the case. While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high. The current forecasts suggest that it will be some time yet before inflation is sustainably in the target range and approaching the midpoint. This reinforces the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range”.

The next RBA Statement on Monetary Policy, released 4 time each year is due for release in February 2025.

Rental vacancy rates

According to the latest Domain Rental Report for the September 2024 quarter, Sydney house rents have reaccelerated, rising approximately 1.5 times faster than in the June quarter. However, despite this increase, it still represents the weakest result for a September quarter in the past four years.

In contrast, unit rents have remained steady during this quarter, holding the record median of $720 per week. Again like house rents, this marks the weakest September quarter outcome in four years.

We believe 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 still 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 rate cuts to come in 2025.
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, inflationary pressures, and rising interest rates have all played significant roles. Additionally, international political uncertainty and potential new 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—namely the imbalance between supply and demand—remain in place. We believe these factors will continue to support a relatively stable market into 2025, with opportunities continuing to present for buyers.

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