Sydney home price falls slow over January as market shows signs of recovery

Sydney home prices have fallen by the fastest rate in a decade but new figures indicate the worst of the slump has passed and market conditions could soon change.

Sydney’s rollercoaster housing market has been stabilising and could soon bottom out following the fastest price falls in a decade, new figures have revealed.

PropTrack’s monthly Home Price Index showed prices continued to drop over January but the 0.06 per cent average fall over the month was the smallest since interest rates started increasing in May.

Drops in prices over preceding months had already been much smaller than during mid-2022 when the Reserve Bank of Australia announced its most aggressive interest rate hikes.

Monthly falls over May, June and July had been close to 1.5 per cent before reducing to drops of under 0.3 per cent in October, November and December.

The total median price drop over the past year was 7.27 per cent, which PropTrack indicated was the largest fall in the country and the fastest rate of price decline recorded in at least 10 years.

Auctioneer and market commentator Tom Panos said buyers were seeing value again after last year’s price falls. Picture: John Appleyard

The median price of a city dwelling, based on sales of units, townhouses and houses, is now $981,000.

Housing experts said further price declines were likely over the coming months but the slower recent falls suggested the worst of the current slump had passed.

PropTrack senior economist Eleanor Creagh said it was impossible to predict precisely when prices would stop falling but added that the market could be close to hitting a “trough” period.

Ms Creagh said conditions did not support further massive falls in prices and there were multiple forces keeping a floor under the market.

“Borrowing capacity has dropped by nearly 30 per cent since May and people can no longer afford to pay the prices we saw before rates increased. So interest rates are putting downward pressure on prices,” Ms Creagh said.

“At the same time, migration, rising rents, tight housing supply, a decent economy and wage increases are offsetting some of that downward pressure.”

Eleanor Creagh, senior economist at PropTrack, said conditions didn’t support further, significant price falls.

My Housing Market economist Andrew Wilson said Sydney was too “undersupplied with housing with no fix in sight” for large-scale price falls to continue.

“Prices still haven’t reached the bottom but they are getting close,” Mr Wilson said.

“I sense we will get a bottoming out in the March quarter. We may resume growth after that but it will be very modest growth because affordability drivers aren’t there.”

AMP Capital chief economist Shane Oliver said he expected the market to bottom out in September once the Reserve Bank was finished its current cycle of rate rises.

“The full impact of rate rises still has yet to filter into the market but once prices have fallen more and there is more certainty around interest rates we could see prices bottom out and start to drift higher,” Mr Oliver said.

“It won’t be growth to get excited about, but it will be a turn for the market.”

PropTrack’s January Home Price Index showed units recorded bigger falls than houses, with unit prices falling an average of 0.15 per cent and house prices dropping an average 0.03 per cent.

This was a reversal of earlier in the property slump when detached houses were the main drag on the market and unit sales were still inching higher.

Auctioneer and market commentator Tom Panos said detached house prices had hit equilibrium in some areas because buyers were seeing value again and had a shortage of available properties to choose from.

“Part of the reason for that shortage was that many sellers were simply taking their properties off the market if they didn’t get the prices they wanted, Mr Panos said.

“When multiple sellers do that it creates a shortage of stock and it puts a safety net under the falling market.”