Sydney property price falls: What your house will cost in 2023

House buyers will be paying very different prices across Sydney next year due to the falling market. See how much prices are forecast to cost in each region

Home seekers would be able to snap up houses for nearly $350,000 less than current prices in parts of Sydney’s west, north and south by the end of next year if the market continues to plunge.

And in the city’s most affluent areas, buyers could be paying as much as $970,000 less, price analysis has revealed.

With more interest rate rises expected, buyer sentiment dropping and sellers taking much longer to offload their homes, major banks are forecasting price falls of 15-20 per cent over the next two years.

This would be a significant sum for most housing markets across the city considering close to 70 per cent of Sydney houses are currently priced above $1.5 million, while two thirds of the units are over $800,000.

Experts warned Sydney’s inflated prices relative to the rest of the country made it the most vulnerable market to rising rates.

Danny Lo and Stephany Yahya, with kids Eleanor and Aerin, recently refinanced. Picture: Tim Hunter.

“Sydney had the highest growth in prices, it’s reasonable it will have the biggest correction,” said My Housing Market economist Andrew Wilson.

SQM Research analyst Louis Christopher said buyers’ diminishing borrowing power, coupled with Sydney prices already being “extremely overvalued” relative to residents’ incomes, meant current prices could not be sustained.

“Prices are already dropping and they will keep falling this year,” he said, adding that while this would be a negative for existing homeowners, it would favour first homebuyers.

“If you’ve saved a good deposit, you are in a prime position to get a bargain later this year,” Mr Christopher said.

“First homebuyers should be in no rush to buy. They have plenty of time to wait and see what will happen. The market isn’t about to turn.”

An 18 per cent drop in house prices over two years, including an 11 per cent drop over 2022 and a further 7 per cent drop in 2023, is the forecast of Commonwealth Bank, the nation’s largest lender.

This kind of drop over two years would wipe $330,000 off the average price of houses in the Hills district.

The same drop would skim about $310,000-$320,000 off the average house price in the St George region and Sutherland Shire, and $337,000 off houses in the Hornsby area in northern Sydney.

In Parramatta, nearby Cumberland LGA, and Canterbury-Bankstown, the house price falls would be $200,000-$300,000, analysis of PropTrack data showed.

Sydney’s east and lower north shore would see even bigger property price drops of up to $560,000-$970,000 under the CBA forecasts, but buyers would still be paying over $4 million in many suburbs.

Other lenders have released similar price forecasts for Sydney, with ANZ modelling released this week predicting a total drop of 20 per cent over two years.

Digital Finance Analytics said a drop of 15-20 per cent seemed the most realistic outcome for the market, but noted price falls would not be uniform across Sydney.

This Dural house recently sold for nearly $300,000 below the list price.

“Households are very twitchy about expenses at the moment and banks are tightening up their lending criteria. Buyers are much less likely to commit to a big mortgage,” he said.

“Another thing to consider is that the bank of mum and dad was a big factor in getting people into the market last year.

“It was predicated on the idea there was lots of equity in their house. That looks to be evaporating. Without that, there will be less buyers able to afford (current) prices.”

Mr North said first homebuyers should be cautious. “I’d be sitting on the sidelines. More property is coming in. Vendors have to take a haircut to sell. The last thing you want to do is rush in and be in negative equity.”

Matthew Robbins from North Shore brokerage Shore Financial said price drops and rate rises were playing on buyers’ minds and sentiment was low.

“Some clients have stopped looking altogether, but some think now is as good a time as any because you are getting a discount on what you would have paid six months ago,” he said.

Ray White chief economist Nerida Conisbee said the outlook for buyers could be more certain later this year since the severity of price falls would depend on a variety of global events.

This included lockdowns in China, the war in Ukraine and the global inflation outlook, she said.

This Lindfield home was listed for sale at $4.4m-$4.6m, but sold for $4.085m in May.

Mr Christopher noted there was danger in first homebuyers waiting too long.

“It’s very difficult to time the market. Think of the long-term and keep in mind history. First homebuyers who bought in 1990, when interest rates were 18 per cent, made the right choice for the long-term. Prices did eventually go back up.”

CHANGE IN PLANS

Falling property prices and rising interest rates have forced Stephany Yahya and Danny Lo to rethink some of their property plans.

The couple said they’re now likely to sit on the fence for a while and postpone their plans to build their dream home until the interest rate environment is more certain.

The family said they will wait and see what happens to the market. Picture: Tim Hunter.

“It’s a lot of money to build a house,” Ms Yahya said. “We still want to live comfortably while we are building.”

They’ve also refinanced an existing investment loan through Sydney brokerage Shore Financial to lock in a better rate while they can.

But Mr Lo said there would be benefits if property prices continued to fall as it could help with their goal of buying more investment properties, particularly as rents climbed. “Our goal is to have a few more under our belt regardless of what the market looks like,” he said.