Sydney home prices approaching peak seen before interest rate hikes

Sydney home prices are almost at their last peak despite rate hikes blowing a hole in most buyers budgets, new home price growth figures have revealed.

Sydney home prices have risen again for the ninth consecutive month and are now close to the previous peak in prices recorded before the first interest rate hikes last year.

PropTrack’s latest Home Price Index released Friday showed Sydney continued to lead the home price recovery, despite having some of the biggest affordability challenges.

Prices rose an average of 0.47 per cent over August and are now 6.19 per cent higher than their trough in November 2022.

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It means prices regained most of the ground lost last year when they fell 7.04 from February to November.

PropTrack Home Price Index heat map in August 2023.

PropTrack senior economist Eleanor Creagh said in the report that there has been stronger housing demand and limited new listings hitting the market for most of the year.

With the spring selling season kicking off and new listings increasing, seller confidence appeared to be improving, she said.

“Buyer demand still far outstrips supply, putting upward pressure on prices,” she said.

“As more new listings come to market over spring, we may see the pace of home price growth start to slow.

“However, with interest rates stabilised and likely near or at their peak, the confidence in the market is likely to sustain, resulting in more of the country returning to positive annual price growth.”

The median house price in Sydney is $1.32m.

Ms Creagh said the continually growing international migration is contributing to the demand and increase in prices.

“Affordability has deteriorated substantially but with the record return in overseas migration and a very tight rental market, some people may be getting into the buyers market sooner,” she said.

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While Sydney is leading the annual growth at 5 per cent, Melbourne prices dropped -0.53 per cent.

Sydney prices are now up 6.19 per cent from their trough in November 2022 with August seeing a 0.47 per cent increase, according to PropTrack’s monthly Home Price Index.

Across Australia, home prices rose again in August, jumping 0.28 per cent. National prices are now 2.64 per cent higher than a year ago and up 3.51 per cent so far this year.

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Ms Creagh said she expected Sydney prices to surpass their peak in the next few months whereas Melbourne and other cities will take a bit longer.