Sydney market forecast predicts more price increases in 2024
Sydney’s house prices are the highest they have ever been, but forecasting has predicted the worst is yet to come.
Sydney’s housing crisis is about to get worse as house prices could jump $50,000 in the new year – after a year of skyrocketing prices.
The PropTrack Property Market Outlook Report released Thursday has predicted Sydney’s house prices are set to continue to increase up to 5 per cent in 2024.
After a year of persistent month on month growth, house prices are already 8.3 per cent higher than a year ago, and have surpassed the previous peak.
This has meant Sydney’s median home price is about $80,000 higher than a year ago.
With the forecast predicting a rise between two and five per cent, that could mean another $50,000 on top of already record high prices – taking Sydney’s median dwelling price from $1.065 to approximately $1.11m.
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The forecast considers the current market trajectory, predictions on housing supply, the trajectory of interest rates and the impact of rate rises to date.
PropTrack’s director of economic research Cameron Kusher has said that the upward trend will continue as the factors pushing Sydney’s prices up aren’t relenting.
“If we look at the first 12 months Sydney prices have risen, which at the start of the year we were forecasting price falls due to rate rises and housing affordability sitting at its lowest level in decades.
“But instead what we have seen is a strong rebound in sales but the demand has picked up even more,” he said.
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Increasing levels of buyer interest with a lack of new homes and the cost of new housing construction still extremely high, means prices have been pushed higher this year.
The rate of increase is however predicted to slow slightly, according to PropTrack.
“The main reason it will slow is the ongoing impact of rate hikes, and we expect unemployment will rise,” Mr Kusher said.
Sydney’s market has proven resistant to rate rises, with Mr Kusher suggesting it would be highly unlikely for it to stop now.
“To stop house prices going up we would need a lot more housing to be built and interest rates to go much higher, which is unlikely. The federal government want to build 1.2m homes over the next five years but that effect will take a while to match the demand we are seeing,” he said.
Another factor that could affect house prices next year is tax cuts that are set to benefit higher income earners from mid 2024.
“People who earn higher incomes will pay less tax, and have more money in their pockets, which will likely make them feel wealthier and could encourage them to invest that extra money into the housing market,” Mr Kusher said.
Despite rate rises and lower borrowing power, first homebuyer sales in NSW were up one quarter compared to 12 months ago.
Mr Kusher said the first homebuyer has been an “interesting” trajectory.
“Price rises are going to prevent some first homeowners, but the cost of rentals are increasing so much that those who have capacity to do so will be keen to exit the rental market,” he said.
Mr Kusher doesn’t expect price rises will slow first home buyers down in the new year.
“For first home buyers there are government supports in place, more people will look to these opportunities who are ready to escape the challenges of renting,”
The rental market is expected to continue to suffer as house prices surge and Sydney continues to see among the highest number of net migration.
“Broadly speaking, rent will continue to rise in the next 12 months, it comes down to supply, the rate of migration is forecast to slow a little bit, but is still well above it longs term expectations,”
Extreme tightness in the rental market has highlighted Australia’s housing shortage, and with tight rental markets and strong rental price growth, this is likely to continue to buffer house price falls.
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Originally published as Sydney market forecast predicts more price increases in 2024