Strong market performance in H2 2023 prompts expectations for next year
The Sydney property market has exceeded growth forecasts in the latter half of 2023, signalling potential robust growth in 2024, according to the latest Shore Financial State of Sydney Report.
To comprehend this trend, Shore Financial assessed the forecasts made in the December 2022 and June 2023 editions of its State of Sydney Report.
Analysis of Sydney property market forecasts
The December 2022 edition adeptly gauged the Sydney property market's status, using analyses of asking prices, days on market, inventory levels, and sales volumes. It accurately highlighted the imminent strong price growth in specific suburbs, despite an overall median price correction.
In contrast, the June 2023 edition, while employing similar data points, experienced more significant deviations between forecast and actual results. The oversight stemmed from an inability to capture the substantial pent-up demand in numerous suburbs, leading to outcomes surpassing initial predictions.
Theo Chambers (pictured above), Shore Financial CEO, reflected on the retrospective analysis, emphasising its importance in understanding the current market dynamics.
“This time last year, the Sydney property market was in a fairly predictable place,” Chambers said. “We’d had a large boom during the pandemic, that had been followed by a correction, and it seemed like the market might fall a little more before entering a period of moderate growth. That’s largely how things played out.
“Six months ago, the Sydney property market was in a state of flux. It was hard to tell if demand was being artificially propped up by low housing supply or if it was the result of genuine buyer interest. As a result, the data seemed to suggest that we could expect moderate rather than strong price rises. In reality though it turned out that more Sydney suburbs were in growth mode and at higher rates than expected.”
Chambers identified four key factors contributing to above-average growth: Sydney’s rapidly increasing population due to external migration, tight rental vacancy rates prompting a shift from renting to buying, a self-fulfilling prophecy of rising prices, and a persistent imbalance between demand and supply.
Potential boom in 2024 despite economic indicators
Chambers anticipates potential boom mode in the Sydney property market for 2024, defying expectations based on elevated interest rates, rising unemployment, and close-to-record-high median prices.
“Demand is likely to remain strong, because it’s likely that external migration will remain high and that the rental market will remain very tight and continue pushing people into the sales market,” he said. “At the same time, the supply of new listings is likely to remain constrained, because that’s been the trend in recent years and there’s nothing to suggest that will suddenly change.
“When you put all that together, there’s a reasonable chance the Sydney property market will be in boom mode in 2024.”
However, Chambewrs acknowledged potential alterations to this scenario if the Reserve Bank increases interest rates, unemployment surges, or a surge in vendors listing their homes occurs to capitalise on higher prices, leading to more moderate price growth.
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