Sydney home prices plunge amid interest rates warning
The Sydney housing market has become trapped in a downturn, with home prices falling significantly in some areas since late last year.
Gravity has struck Australia’s once soaring housing market, with prices in Sydney and the rest of the country falling for the second month in a row.
The declines have trimmed nearly $20,000 off home values in some areas and flipped Sydney from an extreme seller’s market to one favouring buyers.
Expectations are for more falls to come until interest rates are cut because of growing hesitancy from buyers and a recent increase in listings, which have eased competition among home seekers.
PropTrack’s latest Home Price Index, which charts changes in unit, townhouse and house prices each month, revealed Sydney’s median dwelling price dropped 0.21 per cent over January.
The median had dropped 0.29 per cent over December, while price growth over September, October and November was largely flat – a marked change from early 2024 when prices were surging.
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Prices in every Sydney region, minus the outer west and Blue Mountains, are now cheaper than they were at the start of November.
Sydney’s southwest had the biggest value falls, with prices declining an average 1.79 per cent for the quarter – trimming about $19,000 off the median value of dwellings in the area.
Other regions with notable falls were the eastern suburbs, where prices dropped by 1.22 per cent or about $18,600 over the three months, and the CBD and inner south, with a drop of 1.59 per cent ($16,170).
REA Group senior economist Eleanor Creagh said the market was “softer” in late 2024 and these conditions carried into the new year.
“This softening in growth has occurred alongside a surge in stock for sale, giving buyers more choice and reducing the urgency to transact,” Ms Creagh said.
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“Affordability challenges, weaker economic conditions and the sustained higher interest rate environment have also been contributors to slowing – and reversing – growth.”
Sydney price falls have come amid a broader trend of home price declines across the country.
Capital City prices dropped an average 0.16 per cent over January and 0.25 per cent over December – the first consecutive months of national falls in two years.
Price declines were recorded in Melbourne, Adelaide, Hobart, Canberra and Darwin over January, while Perth values were put on ice.
Brisbane was the only capital where values grew, albeit at a fractional 0.08 per cent.
Ms Creagh said the current national downturn would be neither deep nor long because of imminent interest rate cuts.
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With inflation dropping, financial markets are now tipping a nearly 80 per cent chance of a rate cut next month, with NAB this week joining the rest of the big four banks in predicting a cut in February.
“As interest rates move lower this year, boosting borrowing capacities, improving affordability and buyer confidence are expected to drive renewed demand and price growth,” Ms Creagh said.
She added that the pace of any kind of price rebound after a rate cut would trail “the strong performance of recent years” because housing affordability remains “stretched”.
A report from KPMG released this week forecasted minor home price growth to come in the second half of 2025, once rates are cut, pushing the city median up 3.3 per cent for the year.
KPMG noted that growth over 2026 would be higher, with Sydney values expected to lift by an average of 7.8 per cent – the highest growth in the country.
Prior forecasting from SQM Research, which has a strong track record in predicting price movements, indicated Sydney prices would fall by about 1-5 per cent until there is an interest-rate cut.
A rate cut would then likely halt any further declines in prices, SQM Research noted.
PRICE CHANGES BY SYDNEY REGION (past 3 months)
Northern Beaches-0.92%
South West -1.79%
Eastern Suburbs -1.22%
CBD and Inner Sout -1.59% 0
Blacktown -1.58%
North Shore -1.00%
Sutherland -0.93%
Inner South West -1.17%
Inner West -0.85%
Ryde -0.66%
Parramatta -0.76%
Outer South West -0.52%
Hills District and Hawkesbury -0.07%
Outer West and Blue Mountains +0.12%
Source: PropTrack