House prices within the Inner West skyrocketed to new peaks this quarter, despite the fallout of interest rate hits in full effect. This rise was supported by limited available stock, the strong rental market pushing first home buyers and investors to purchase, the continued post pandemic international influx and buyer interest, and demand from cash ready buyers unaffected by economic fluctuations.
More than doubling greater Sydney’s already steep annual growth, the city’s median house price rose 10.6% to almost $1.6m. Unit prices rose 6.3% to about $796k, with Glebe topping the list, up 21.3%. While Marrickville, Balmain and Newtown were amongst the most undersupplied suburbs in NSW, as stock on the market in proportion to the total dwellings sat at 0.4%, 0.34% and 0.33% respectively.
As is generally the case outside of rapid changes in RBA rates, buyer pool and capacity to pay tend to move in lockstep. This quarter bucked this trend, as prices increased despite financial capacity remaining low. Which makes little sense in a normal economy, though ours has been anything but. With the numerous savings buffers developed through the pandemic due to constrained demand and government stimulus, and the rise of the bank of mum and dad in both first home buyers and upgraders, consumer affordability has become complex and layered. Capacity to pay and income are no longer tied together. These statistics, likely influenced by a small cash strong subsection of the market, have created questions around sustainability. As the gap widens, and households hold back on non-discretionary spending, home ownership is becoming increasingly out of reach to those without generational wealth transfer.
Family homes attracted good interest from local and out of area buyers, as did entry-level units in older blocks. Demand for homes within the $2m-$2.5m bracket was high.
Across the board, minus the Peninsular, the majority of buyers appeared to go on holidays, suspending their property searches earlier in the season than generally occurs historically. Buyer fatigue was high, with low stock throughout the quarter the deciding factor to opt out until early January. This saw a shift from a sellers market into a more balanced market close of year.
Overall, sentiment was lacklustre, as Frederico Fraga-Matos from Bresic Whitney said, “This quarter saw buyer energy decreased and low, with tight stock levels”. Jack Tinworth from Cobden Haysen further summed up the close of year, “The conclusion of the 2023 selling season saw many buyers feeling fatigued, navigating through rate hikes, attending inspections, and experiencing the disappointment of missing out at auctions”.
- Bayside
- The Peninsula
- City Fringe
Sydney reached a historically high peak in 2023, with price growth at unsustainable levels. The start of 2024 has seen stretched affordability weighing on buyer demand, and an uptick in listings giving buyers more choice. This growth looks set to slow until interest rates fall. Joseph Fenech from Hudson McHugh predicts good things, “It is going to be hot and busy. Listing numbers are definitely up there and there seems to be a good amount of new buyers entering the market”. Brandon Nguyen from Bresic Whitney added to this, “It feels positive, however, the first auction weekend mid-February along with the interest rate decision will likely set the tone for the first half of the year”.
With seller confidence on the improve as the Reserve Bank holds interest rates steady at 4.35%, there is a collective sigh of relief. Prices will likely hold until expected rate cuts due the second half of the year. Arden Savio from Bresic Whitney said, “For some buyers there is an urgency to buy in the coming months due to the talk in the market/media about interest rates coming down towards the back end of the year. Personally, I bought at the start of Summer because of this very reason. I think the buyers that can bite the bullet now will reap the rewards when it comes to their asset’s capital growth in the coming years”.
As a long unfamiliar stability re-enters the market after a rolling series of rate hikes in 2022 and 2023, sideline buyers are stepping forward. Alex Cummins from Dib Chidiac, “High buyer demand and fear of loss will continue over the coming months. Buyers who missed out on properties last year will now be in competition with a bigger buyer pool due to the influx of more buyers entering the market at the start of 2024”.
Overall, prospects are looking decidedly favourable, Jack Tinworth from Cobden Haysen said, “As we connect with buyers over the phone, there’s a noticeable surge of renewed energy. Despite lingering uncertainties surrounding potential further rate hikes and a post-Christmas decline in consumer spending, the conversations are filled with positivity. It’s evident that there is an eagerness for the new wave of properties to hit the market”.
Get in touch with Hamada to find out more about the Sydney Inner West property market, or make an appointment to discuss your requirements and see how we can help you get into your ideal home sooner.
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