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Sydney property outperforms expectations, with more growth ahead

Pent-up demand across Sydneyโ€™s property market has seen price increases outperform analysts’ forecasts, with an expert predicting 2024 could be โ€œboom modeโ€ for prices.

According to the Shore Financial State of Sydney Report, the past 12 months of growth have been even better than they initially predicted.

Shore Financial Chief Executive Officer Theo Chambers said looking at the price growth over the past 12 months reveals important clues about the current market.

โ€œThis time last year, the Sydney property market was in a fairly predictable place,โ€ Mr Chambers said.

โ€œWeโ€™d had a large boom during the pandemic, that had been followed by a correction, and it seemed like the market might fall a little more before entering a period of moderate growth. 

โ€œThatโ€™s largely how things played out.โ€

The report found that areas like Hobartville, Dean Park, Casula, North Epping, Currans Hill, Elderslie, Enmore, Terrey Hills and Concord West were some of the areas that outperformed their expectations.

Mr Chambers said six months ago, the Sydney property market was in a state of flux. 

โ€œIt was hard to tell if demand was being artificially propped up by low housing supply or if it was the result of genuine buyer interest,โ€ he said.

โ€œAs a result, the data seemed to suggest that we could expect moderate rather than strong price rises. 

โ€œIn reality, though, it turned out that more Sydney suburbs were in growth mode and at higher rates than expected.โ€

Mr Chambers said four factors contributed to that above-average growth. 

โ€œFirst, Sydneyโ€™s population has been rapidly increasing, largely due to external migration, which is pushing more people into the housing market and bolstering demand. 

โ€œSecond, rental vacancy rates have remained ultra-tight and rents have continued surging, which has encouraged more people to switch from renting to buying โ€“ further increasing buyer demand.

โ€œThird, rising prices have become a self-fulfilling prophecy: people are buying to get ahead of rising prices, which is causing prices to rise further. 

“Fourth, while demand is elevated, supply is still quite low, even though quite a lot of new listings came onto the market over spring.โ€

He said these factors suggest there was more growth ahead.

โ€œA lot of people felt that with interest rates elevated, unemployment rising and Sydneyโ€™s median price close to a record high, weโ€™d see only limited price growth next year,โ€ he said.

โ€œHowever, the reality could turn out to be very different.โ€

Mr Chambers said demand was likely to remain strong as itโ€™s likely that external migration will remain high and the rental market will remain very tight and continue pushing people into the sales market.ย 

โ€œThe supply of new listings is likely to remain constrained because thatโ€™s been the trend in recent years and thereโ€™s nothing to suggest that will suddenly change,โ€ he said.

โ€œWhen you put all that together, thereโ€™s a reasonable chance the Sydney property market will be in boom mode in 2024.โ€

He said that where that might change is if the Reserve Bank kept pushing up interest rates, if unemployment spiked or if a surge of vendors listed their homes to take advantage of higher prices. 

โ€œIf that happened, price growth would be much more moderate.โ€

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.