Sydney home prices fall again as buyers and sellers grow wary of interest rate rise
Sydney home prices have dropped again, but even bigger falls could come as economists warn Harbour City buyers will feel the pinch from rising rates more than in other capitals.
Sydney home prices have begun to fall again and more drops are expected if the Reserve Bank of Australia pushes the button on a rate hike in May or June.
Prices for all types of dwellings, including units, townhouses and houses, dropped 0.1 per cent over April, according to the PropTrack Home Index released Sunday.
Sydney was the only mainland capital to record a drop in values, with PropTrack flagging that city housing affordability was “stretched”.
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Growth in prices had been slowing since late 2021 and PropTrack economist Paul Ryan said the market “stagnated” for much of 2022.
“Sydney has the weakest momentum going into what will be a period of rate rises and affordability is more of an issue so, potentially, the Sydney market will be more susceptible to price falls,” Mr Ryan said.
The April fall equated to an average price drop of roughly $6000 and the typical house now costs about $1.26m, while the median price for units was $762,000.
Price drops were much bigger in city pockets where there was a greater supply of housing, especially high-rise units, with values falling even before the weaker April period.
Unit prices in Punchbowl, Meadowbank, Chipping Norton and Kogarah were more than 6 per cent cheaper than they were a year ago.
Housing experts said any sense of urgency from buyers was evaporating and many were sitting out purchases waiting to see what effect rate rises would have on the market.
It comes as additional mortgage analysis showed Sydney’s higher property prices relative to incomes and greater household debt levels have meant it will be more vulnerable to rate hikes.
A 1 per cent rise in rates, if passed on fully by banks, would mean homeowners who bought properties within the last year would have to funnel an extra $450 per month into their mortgage, on average.
A 2 per cent rise in rates from current levels, which could be a possibility in 2023 or 2024, would mean recent homeowners pumping an extra $940 into their repayments, according to PropTrack.
Mortgage broker Rebecca Jarrett-Dalton of Two Red Shoes said rate rises were weighing on many buyers’ decision to get into the market and some were fearful of overpaying.
Some buyers wanted to wait for further price falls, she added. “It becomes a bit self-fulfilling,” she said. “No one buys because they think the prices will drop, so they drop.”
Ray White Touma Group agent Roger Wardy said many upgraders were trying to sell before they bought their next property. This meant some of the demand for property wouldn’t be unlocked until these homeowners sold their properties.
“Last year it was the opposite,” Mr Wardy said. “Everyone wanted to buy first, then sell.”
He added that demand varied considerably by properties. “The quality homes still sell very well. If it ticks a lot of boxes, people want it, the price isn’t going down,” Mr Wardy said.
Kent Tai recently bought a new home in Coogee after selling his Kensington property and said his willingness to put in offers appeared to give him an advantage.
“Agents told me that because I had my deposit ready to go, I had a pen in my hand ready to sign, that put me in pole position,” he said.
Mr Tai said it was a similar situation for the buyer of the Kensington home he sold. “We could have gone to auction and possibly got a better price, but we were happy with an offer we got and thought ‘better to take it then risk it’.”
Originally published as Sydney home prices fall again as buyers and sellers grow wary of interest rate rise