After a year of declining prices across the Sydney property market, real estate values are rising again.
And Potts Point – as well as some other parts of Sydney’s inner Eastern Suburbs – have been outperforming the border market by some distance.
The median Sydney property price rose 1.4% over the month of March 2023 and 0.3% in February 2023, according to CoreLogic data. These represent the first gains in Sydney’s median dwelling value since January 2021.
What’s interesting is that these price rises occurred before the RBA’s April cash rate pause. They show that market confidence was growing even as interest rates rose. We expect that, with interest rates on hold in April, prices may rise further still over the next few months.
Of course, any current growth has to be put into context: Sydney’s median property value did fall by -15.0% in the year to February 2023, so the latest gains don’t come close to erasing that deficit. However, the median value remains well above pre-COVID levels.
However, March’s market data is an encouraging sign that the market may have reached equilibrium and that the falls we witnessed over 2022 could be behind us.
Demand for prestige property particularly strong
It’s the top end of the market that we’re currently seeing prices rise most rapidly. Domain data shows the median price for four-bedroom apartments in Surry Hills rose 5.9% last year, even as the broader market fell.
There is incredible interest in premium apartments and Eastern Suburbs lifestyle properties. This demand continued right through the market slump and remains strong today. The main reason for this demand is that premium buyers tend not to be as impacted by interest rate movements as other segments.
In particular, there is a lot of interest in large apartments valued over $5 million, as well as penthouses and sub-penthouses. This is because we’re seeing many prestige downsizers enter the market, several of whom intend to list their family home over the coming months. There aren’t enough quality properties to meet the demand generated by this important market segment, and we expect to see many new developments in Potts Point and the East aimed at capitalising on this.
At the other end of the spectrum, we’re seeing more first-home buyers and investors begin actively searching for properties in our area – largely the result of an exceptionally tight rental market. The median rent in Sydney’s eastern suburbs has risen 25.8% over the past year, according to SQM Research.
As a result, many renters are beginning to see value in getting a foot on the property ladder, even in the face of rising interest rates. Meanwhile, investors looking for income can receive a better return on investment than they’ve been able to get for many years.
Auction clearance points to rising prices
Throughout April, Domain recorded a Sydney-wide auction clearance rate of 70% or above. Auction Insider reports that the clearance rate in the City and East is higher still – reaching 78.1% on the weekend of 22 April.
An auction clearance rate of more than 70% is usually a sign of a seller’s market, indicating demand is exceeding supply and prices are likely to rise. Those holding off buying a home in the belief that prices are likely to come down further may find themselves disappointed.
Besides, when the Sydney property market turns, it tends to turn rapidly. At the end of the last market slump between 2017-2019, Sydney’s median house price rose 5.7% in a quarter, according to Domain.
Given March’s figures, this could happen again. However, we need to be mindful that increased interest rates have reduced people’s borrowing power, and this may cap the extent of any broad market rise. We also need to remember that due to low stock levels fewer properties are available for sale than usual, especially here in the inner eastern suburbs.
If we see a new influx of homes come to market this may also change the equation.
What to expect from the market over 2023
Our view is that the current conditions are broadly more favourable for selling than we’ve seen since 2021. The main challenge for anyone listing will be finding their next property, given low stock levels.
We also believe there is genuine value in the market – especially for entry-level inner-city apartments – which generally did not see the same growth throughout the pandemic as many other market segments. This, combined with rising rents, will likely encourage first-home buyers into Potts Point and surrounds.
Median Property Price
These are some of the best-performing property types in our local area, according to realestate.com.au
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If you’re looking to buy or sell in Potts Point or Sydney’s East, contact my team today.