Home prices slashed in parts of Sydney as once booming market cools

Gravity has finally hit the Sydney property market, with most city regions seeing an end to last year’s rapid growth while others saw value falls.

Sydney home prices have been thrown in the deep freeze – and are even falling in some areas – ending a period of roaring growth over mid-2023 that defied interest rate hikes.

Figures released from researcher PropTrack today revealed home prices largely flat lined over January and December, inching down 0.04 per cent over January and 0.08 per cent over December.

PropTrack noted there were minor rises and falls in the preceding months and cumulative growth in prices across the city has effectively been stagnant since September.

PropTrack economist Angus Moore said the price freeze was the result of interest rate hikes finally affecting the market, coupled with an increase in property listings.

“Buyer sentiment has taken a knock, especially since the November rate hike,” he said.

Prices have risen rapidly in 2023 because of a shortage of listings, but listings volumes have gradually been increasing. Picture: Julian Andrews

Most of the price adjustments were in the higher end of the market, with PropTrack reporting median price falls over the past three months in the city’s more expensive regions.

This included the eastern suburbs and inner west, along with the northern beaches, where the average dwelling price fell by about $20,000.

There were also minor price drops recorded on the lower north shore and inner city region.

Mr Moore said the cooling market is a marked change from early- and mid-2023 when home seeker demand began to rise, with buyers spending record amounts of money.

This resulted in Sydney home prices hitting a new peak in spring, exceeding the previous peak in 2021 when the property market was going through a boom fuelled by record low interest rates.

Home values have been falling in pricier markets like the northern beaches and eastern sburbs.

Last year’s price increases had left many economists scratching their heads in disbelief because interest rate rises have historically been matched with price falls.

“We expected there to be price falls over early 2023 because buyers had less to borrow and affordability was already stretched, but it proved not to be the case,” Mr Moore said.

“That was partly because housing stock was unusually low. There was little choice for buyers. That has been changing since spring and competition has been spreading across more properties.”

My Housing Market economist Andrew Wilson said prices were flat lining, or inching down in some cases, because the market was “running out of puff”.

“It was a catch up market last year because prices had dropped (in 2022). Once we caught up the previous peak, buyers became strained. You can’t keep paying more if your income hasn’t gone up and your borrowing capacity has dropped.

“There was also a pent up demand in 2023. That’s all been released now. The energy is gone.”

Mr Wilson said Sydney may endure further price rises later this year because demand still exceeded supply, but such rises would likely be insignificant.

“We expect the market not to do much this year,” he said. “It’s going to be a more boring market. But boring is good. It’s what we’ve been missing for the last decade.”

City regions where median prices have fallen over past 3 months

Northern Beaches -1.05%

Inner West -0.86%

City and Inner South -0.77%

Eastern Suburbs -0.45%

North Sydney and Hornsby -0.43%

Hills and Hawkesbury -0.28%

Ryde -0.26%

Inner South West -0.14%

Source: PropTrack