For Sydney’s property market, 2023 has been a surprisingly strong year, with the citywide median dwelling value rising 11.9% since its January trough to stand at $1,125,533, according to CoreLogic.
What’s particularly impressive is that this rise has coincided with rising interest rates, with the RBA taking the official cash rate from 3.35% at the start of the year to 4.35% today.
Widespread gains in Postcode 2011
A year ago, in 2022, prices across most of Sydney had fallen sharply, with the citywide median collapsing by -12.4% but here in Postcode 2011, prices were relatively stable over 2022.
On the back of this stability it’s perhaps even more impressive that the median price has grown in many parts of our local area over 2023. In fact, we highlighted several different hotspots in micro areas and property types last month.
Here’s how apartment values fared over the past 12 months:
|Median Apartment Value November 2023
|Median Apartment Value November 2022
* Source: Realestate.com.au market data, accessed 14 Dec 2023
A tale of two markets?
These figures really only tell part of the story. To some extent, what we noticed over 2023 was a two-paced market, with noticeably strong demand from downsizers and prestige buyers, while investors and first home buyers were less active.
That the action has been towards the top of the market is reflected in the fact that Domain data reveals almost a $3.5 million gap in the median value of two-bedroom ($1.55 million) vs three-bedroom ($4.9 million) apartments in Potts Point.
It is also reflected in the growing gap between house and apartment prices. Sydney’s median house value is now 67% higher than the median apartment value, according to Domain. Prior to the pandemic it was just 35%.
In our area, which has comparatively few houses, that gap is much wider still. While there are too few houses sold for meaningful data in Potts Point or Elizabeth Bay, in both Darlinghurst and Surry Hills houses sell for more than double the price of apartments.
What drove the property market in 2023?
We’ve seen that higher interest rates can often hit first-home buyers, investors and upsizers hard, while downsizers and prestige buyers can remain immune.
That said, Potts Point remains relatively affordable to buyers who are prepared to settle for a one-bedroom apartment (the median one-bedroom price is just $850,000, according to Domain).
Another factor at play is the premium people will now pay for space. Since the pandemic, a home office has become one of the most sought after features in many people’s property search. Oversized living areas and generous outdoor spaces are also in high demand.
As a result, people will often compete far more strongly for these features, and this is pushing the price of larger apartments upwards.
Finally, the divergence in the market is the result of a prestige property performing well not just in Australia, but globally. As we’ve written previously, the prestige market is driven by different factors than other market segments. Instead of interest rates, it’s often the health of the share market and economy that matter more.
There are also too few truly prestige properties in our area – such as penthouses and sub-penthouses – to meet the demand, especially for prestige downsizers.
All of these factors are combining to push prices in this segment higher.
What’s in store for 2024?
As the year comes to an end, it’s worth reflecting on the trends and patterns we see emerging over the next year.
Most commentators see room for growth in the Sydney market, albeit at a slightly slower rate than this year. The Big Four banks all estimate the city’s property market is likely to rise by between three and five percent.
Drilling down further, we expect the heat in the prestige market to continue. Many downsizers are especially frustrated by the lack of stock available to them and any property that comes onto the market that fits their criteria is likely to be hotly contested.
We’re also hopeful that the value at entry-level in our area, combined with new and more generous government incentives, will bring more first-home buyers into the local market over 2024. After all, rents have been rising rapidly (SQM Research shows that across postcode 2011 asking rents climbed 19.3% over the past 12 months), so buying should begin to look attractive for some, even in the face of high interest rates.
Higher rents should also spur some investors into the market. Realestate.com.au data shows that Potts Point yields have grown to almost 4% – the most they have been in recent memory.
Finally, it’s worth mentioning that times like these – where growth tends to be moderate rather than spectacular – is often when the best property moves are made. That’s because if you buy and sell, you’re likely to be transacting in the same market and can take your time to get it right.
My advice to anyone thinking of making a property move is to do it when it suits you, rather than waiting for the is to make a move now in calmer conditions rather than waiting for the next price surge.
We’ve celebrated many big sales in 2023. Most recently we sold 42/93 Elizabeth Bay Road in the Kincoppal building for $8.825m. We also sold 7/8-10 Billyard Ave off-market for circa $6.7m.
1104/81 Macleay Street in the Ikon building sold for $6.2m and the Penthouse in Billyard Ave broke records when it sold in November.
Listings to watch
9 McDonald Street, Potts Point, a fabulous five-bedroom terrace house in a tucked away location.
55 Victoria Street, Potts Point, an exceptional four-bedroom, four-storey home on leafy Victoria Street.
518/81 Macleay Street, Potts Point, a two-level one-bedroom apartment in the coveted Ikon building.
All of us here at the Jason Boon Team wish you a very festive holiday season, and a prosperous New Year. See you all in 2024!
If you’re thinking of buying or selling in 2024, contact my team today.