As we finish the year it’s time to reflect on the past 12 months and take a snapshot of the current state of the property cycle in south-east Sydney to determine what lies ahead over the next year. As a nation we didn’t fair too badly despite the sentiment in Sydney all year. National values adjusted by just -3.2% overall, and without Sydney’s -10.6% contribution our national market is still up 7.4% over 12months.
Clearly the largest corrections around the nation have taken place over the past two quarters in the capitals and sub-markets which took the highest gains during covid and this includes sub-markets such as houses. Sydney and Melbourne have adjusted the most, and whist Brisbane is still up 3.3% annually it had a strong correction of -5.6% this quarter. Adelaide is up 13.4% and Perth is cementing its position as potentially being the only capital to see through this down cycle with gains. A strong WA economy, backed by the cheapest capital house prices and strong rental yields now draw the attention of active investors keen to acquire property for short-term safety.
Breaking down into quarters the nation is only in its second quarter of a true correction period fuelled primarily by interest rate hike sentiment. Realistically we have not yet had enough time transpire to see the true damage to the housing market as the lag time between rate rises and mortgage stress can take six months or more.
The RBA announced a further 25 basis point rise in interest rates today in a statement by Philip Lowe which was no surprise. Inflation still shows little signs of stopping as Aussies keep spending, however the inflation rate eased slightly in October based on the consumer price index (CPI) which is now done monthly rather than quarterly. Wages growth is up but at half the speed of headline inflation. Retail figures over the Christmas period will provide a sounding decent block for the RBA to isolate disposable income from consumer sentiment. By the next RBA meeting in February we will have a clear picture on where inflation and interest rates are heading. This will ultimately dictate the next growth cycle this time around in the market.
At this stage predictions are mixed whether we will see another rise in February. The RBA may pause rates or even just put them up 15 basis points rather than 25. Best case for the property market will be a pause based on a healthy ease of inflation. In its statement today the RBA closed with a further expectation of future rate rises. Keeping a keen eye on inflation indicators over the coming months will get you in front of the 8-ball because we will only have speculation until February.
In South-East Sydney we have seen a mixed bag of results over the last month. The over-all adjustment has been largely consistent with Sydney however some sub-markets have been performing better than others. The most effected property has been the upper-end houses, in particular unrenovated homes. Potential buyers have been spooked by the rapid rise of construction costs and the difficulty finding trades. Some housing has seen adjustments of 15% over 2022. Smaller houses and semi’s on the other hand are still trading fairly as the demand for non-strata living and buyers looking to trade up from apartments still remains. Apartments have corrected by only about 5% compared with around 10% for housing. This trend follows a similar pattern to the overall national market in which the property that took the largest gains between 2020-2022 is now falling off the quickest. Following a rule of ‘what goes down must come up’ provides so many clues as to where to find your next investment. The current resilience of Perth during this downturn is another prime example of this.
Another factor which will save the Sydney market from a drastic drop will always be stock levels. When people in Sydney don’t get the price they want they generally just don’t sell. Because South Sydney is very largely owner-occupied the market is very tight and when demand drops so do the listings which tends to even things out. This year we will finish on just over half the number of sales across Bayside, Randwick, and Sydney council compared to 2021. The long-term forecast for population growth in Sydney is very strong with Sydney offering a unique lifestyle and economy which is a huge attraction point for overseas migrants. The market should correct further over the coming three months between 2-3% after which a stabilisation period may take place for the remainder of 2023. The next upward cycle will rely less on confidence and more-so on population and wages growth to fuel the market.
Lending has never been tighter so it pays to have an experienced mortgage broker in your corner. At NG Farah we have teamed up with Demore Mekari of Demore Lending. If you are considering taking advantage of this buyers’ market or even refinancing, Demore has a background in both real estate and finance giving her a unique edge when it comes to property purchases. To enquire or obtain a free consultation she also does home visits as part of her personal service and can be reached here.
See links to sales data for the past quarter in the Bayside, Randwick and Sydney City Councils. For selling enquiries please feel free to click this link for a cost and obligation free professional opinion on your homes current value.
For more information on the property market, purchasing opportunities or fees and charges associated with selling, please visit billycouldwell.com
Billy Couldwell
NG Farah
0416 713 721
billy@ngfarah.com.au
198 Coogee Bay Road, Coogee