With the first week of the last month of 2023 behind us, it’s time to look ahead. But first, a quick recap of Sydney’s property market this year. In a word, wow. In an abbreviation, WTF.
Defying all odds and expectations, on the back of increasing interest rates, property prices recovered and then some. After the short and sharp 2022 downturn (house prices fell by an unprecedented 9.6% from peak to trough over three consecutive quarters), recovery was expected to be slower than a trip on the Rozelle interchange. Instead, the median house price both nationally and in Sydney reached a record breaking high, fuelled by a high buyer demand and a shortage of listings.
So, what does 2024 have in store for us?
Depends who you ask—and trust. According to Domain analysts, prices could climb a sizeable 7-9% in Sydney next year. Nationally, they’re tipping house prices to rise 5-7%, with a 7-8% rise in Brisbane and Adelaide, 6-7% in Perth, 3-5% in Canberra, and 2-4% in Melbourne and Hobart. These numbers are in line with Domain’s earlier predictions in their Forecast Report published back in June.
The SQM forecast is much more humbling. According to SQM’s annual “Boom & Bust” Report, house prices are predicted to fall in five capital cities next year, including Sydney. If interest rates continue to rise and migration slows, SQM anticipates a -6% price correction in Sydney, or a rise of 3% if rates stay put and migration continues to increase rapidly.
Two key possibilities are behind these forecasts. One is the expectation that the rate of net short term and longer-term migration will peak and then ease in 2024, and the other is that the inflation rate will return to 3%-4% by year’s end.
With Sydney house prices slowing in November to a minor 0.3% increase (the lowest since February and an annualised rate of 3.6%), perhaps SQM is closer to reality. But after this year’s whiplash inducing turnaround, anything could happen.
Citing rising interest rates over 2022, 2023 and potentially 2024 pushing mortgage holders and prospective homebuyers to the limit, SQM’s predictions are also influenced by the sharp deterioration in housing affordability.
Meanwhile, Domain’s main prediction drivers include population growth, the lack of housing supply, interest rate cuts, and the possibility of more relaxed lending. If calls to review the mortgage serviceability buffer are answered, buyer’s access to the property market could be fast tracked next year.
According to ABS data, in the year ending March 31, Australia’s population increased by 2.2% year-on-year, owing predominantly to overseas migration in all states across the country. If that level of growth continues, population-driven housing demand will “outstrip our current housing supply”.
Meanwhile, if interest rate cuts take place later in 2024, Domain experts anticipate a rise in consumer sentiment that will lead to more activity on the market. Add to that a change in the first letter of the NIMBY acronym from an N to Y (which Domain expects will lead to positive housing reforms and inevitably more housing options), and we could have another year of unexpected growth on our hands.
