Why homeowners will have to ‘survive’ until 2025
The cost of living crisis means homeowners will likely have to keep their heads down until at least 2025, experts say.
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There are divergent forecasts on the direction of the Sydney property market in 2024 after the unexpected rebound during this year.
Ray White economist Nerida Conisbee reckons Sydney house prices are likely to rise by at least 5 per cent, helping mortgage holders “survive” until 2025.
But Louis Christopher, at the leading property researcher SQM, anticipates a scenario with prices dipping by up to 4 per cent. His base case anticipates a cash rate between 4.1 per cent and 5 per cent, slowing population growth and unemployment rising to between 4.5 per cent and 5.5 per cent.
“The interest rate rises of 2022, 2023 and possibly 2024 will finally start to bite homeowners and would-be homebuyers alike,” Christopher anticipates. He predicts apartments to outperform along with top-end properties.
Cameron Kusher, PropTrack’s executive manager for economic research, expects prices to rise 4 per cent in Sydney, singling out the rapid rate of migration as a key support for the housing market.
This time last year, almost all the forecasts were for house prices to soften during 2023 but the market instead saw rising Sydney prices every month in the PropTrack index. There has been 7 per cent plus annual growth to a dwelling median of about $1,070,000.
Looking to 2024, higher interest rates will challenge Sydney housing affordability for many, PropTrack economist Paul Ryan notes.
“This may slow price growth and rebalance buying conditions across the market,” he forecasts.
PRD chief economist Dr Diaswati Mardiasmo notes that with the economy entering a new phase of higher interest rates and lower household savings, 2024 buyers will have to really determine what is important.
“Buyers will most likely need to compromise on an ideal liveability situation,” she says.
“Sydney houses are still the most expensive for liveability, with buyers needing to add 80 per cent premium on top of the NSW state average home loan.”
Rising cost-of-living pressure is variously showing up in market considerations with buyers on the lookout for energy-efficient homes, according to the recently released PropTrack Energy-Efficient Housing Report.
Less certainty about interest rate direction certainly became a major factor in the late spring selling market, in some market segments, with the November RBA increase of a further 25 basis points to 4.35 per cent coming after four months without a change.
The seasonal boost in stock levels is another key reason for the slowing in momentum. The Sydney auction listings remain above the 1000 Super Saturday level on the first weekend of summer according to PropTrack.
Clearance rates have been dipping, not dramatically, but the trend is weakening as vendors seek to get deals done before 2023 ends.
There have been boosts in the mid and late spring private treaty listings too.
It all means vendors should not expect a Santa Claus rally in the Sydney property market.
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Originally published as Why homeowners will have to ‘survive’ until 2025
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