Sydney Property Market

The Sydney Property Market – November 2023

The Sydney property market has defied expectations over much of 2023, exhibiting growth and resilience despite a rapid series of interest rate rises and cost of living pressures.

The primary drivers of this market growth have been the low housing supply and unexpectedly robust buyer demand. Despite the recent spring uptick in supply we are still seeing active buyers outstripping the number of available properties in many areas. The auctions we have been attending for quality properties in popular locations are attracting a good level of competition, resulting in strong sale prices.

Sydney property market statistics

Growth figures

After a difficult 2022, the Sydney property market is well established into another growth cycle although it appears the pace of growth is slowing.

According to CoreLogic’s Home Value Index, the Sydney residential market has grown 0.8% in total for the month of October 2023 (0.9% for houses and 0.6% for units).

Of the national markets, looking at YTD figures, Sydney has overtaken all other capitals recording 10.9% growth (12.1% for houses and 8.0% for units).

Auction clearance rates

Auction clearance rates have been relatively strong for most of 2023. Most weeks in 2023 have recorded clearance rates in the 65%-75% range. To put this into perspective, rates higher than 70% are generally considered to indicate a strong market where sellers have the upper hand.

Interest rates

Interest Rates have been increased by the Reserve Bank of Australia (RBA) thirteen times since 4 May 2022. Rates have moved from a record low of 0.1% to 4.35% in an attempt to curb inflationary pressures and are now sitting at their highest in 12 years.

The RBA meetings held in July, August, September & October 2023 have all seen rates held, whilst November’s meeting saw a return to rate rises, with a 0.25% rise.

Earlier predictions that inflation has reached a peak and that rate rises may have come to an end have been revised and the RBA has left the door open for future rate rises which will be based on inflation data. Most experts are predicting a further rise in early 2024.

Rental vacancy rates

According to the Domain Rental Report for the September 2023 quarter, Sydney house rents rose for the third consecutive quarter (+2.9%). The pace of rental growth however has halved when compared to the previous quarter.

Apartment rents showed a substantial deaccelaration of rent growth over this quarter, growing 1.5%.

Sydney’s overall vacancy rate has returned to a record low of 0.9%, last seen in March, 2023.

The main factors affecting the Sydney property market

There has been a shortage of stock with buyers outnumbering sellers. Despite the higher numbers of listings heading into spring, buyers still outpace listing numbers in most of the areas we work in. This supply shortfall is not expected to ease in the coming months.
Buyers had been becoming more confident now interest rate rises have been put on pause. The effects of the recent rate rise have not been tested yet
Overseas buyers have returned to the Sydney market in relatively large numbers. There is also a significant increase in immigration after the lengthy border closures experienced during the pandemic
First home buyers are entering the lower end of the market, especially apartments, due to significant rental price rises making it more attractive to purchase
Investor activity is a bit mixed, with mortgage repayments causing some investors to sell up, whilst others are attracted into the market due to the increasing returns from a tight rental market

Where to from here?

Over the last few years the Sydney property market has been increasingly very hard to predict with covid lockdowns, the Russian invasion of Ukraine, inflation and interest rate movements.

A new uncertainty has arisen with the emerging situation in the Middle East and its effects are yet to play out on the market. Whether the conflict can be contained or whether it will spread to neighbouring countries will be important and we would be brave to predict the outcome just now.

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