2024 has started steadily for Sydney’s property market, with the citywide median price rising 0.3% in the three months to 22 February, according to CoreLogic.
But could reduced inflation, rising wages and the likelihood of rate cuts combine to create another price surge?
What’s happening in the inner city property market today?
So far, 2024 has been a relatively balanced market here in the inner eastern suburbs. We’re not seeing the runaway price rises that we experienced in 2021, nor are we seeing the price falls that characterised much of 2022. Instead, the calmer conditions that prevailed in the second half of 2023, continued throughout the summer.
This is reflected in auction clearance rates, which Domain says have been sitting at, or around, 70% across Sydney throughout February – albeit off relatively low numbers (usually March and April is when more stock gets listed and we get a more accurate and meaningful auction clearance rate).
According to realestate.com.au, the median price for a Potts Point apartment currently sits at $905,000 (up 4.6% from this time last year). Nearby in Elizabeth Bay and Darlinghurst, the median apartment sells for $985,000 and $972,000 respectively. Meanwhile, Darlinghurst houses sell for a median of $2,105,000.
The best-performing property type in our broader area over the past little while has been Darling Point apartments, which now sell for a median of $2,905,000, with prices rising 16.2% over the past 12 months and 64.6% over the past three years.
This partly reflects the growing number of prestige downsizers in the market, many of whom prize Darling Point. We’ve seen great interest from this demographic in properties like 1/33 Sutherland Crescent, a dual-level, three-bedroom penthouse in The Terraces, Darling Point.
Could the market suddenly become turbocharged?
One reason we’re seeing so much activity in the prestige downsizer market is that these buyers have been relatively immune from the interest rate rises of the past couple of years.
Rising interest rates have been a dampener on many parts of the inner city property market, especially the investor and first home buyer segments – usually so important in our local area.
There has been a real absence of both buyer types for some time now, and this is reflected in the fact that entry level properties have underperformed other parts of the market. However, we’re seeing signs this could soon change.
Most importantly, people are becoming more confident that we’ve seen the peak of the interest rate cycle. Many experts are forecasting we could see even more than one rate cut by the end of 2024.
On top of that, the economic data is beginning to instil greater confidence in some potential buyers we speak to, with unemployment staying low, inflation receding, and wages (finally) growing.
Good times for first-home buyers?
If we do start to see interest rate cuts, it could release the pressure valve for first home buyers in particular.
Our market can offer surprisingly good value to first-home buyers – especially for those wanting to purchase a one-bedroom apartment.
Realestate.com.au data shows the median one-bedroom Potts Point apartment sells for exactly $800,000. This potentially makes it stamp duty-free for first-home buyers.
Coupled with this, first home buyers could also get access to other assistance such as the federal government’s First Home Guarantee Scheme, which allows them to potentially buy a home with a 5% deposit and no lenders mortgage insurance (LMI).
Other buyers likely to be impacted too
But it’s not just first home buyers likely to benefit. Investors could find that lower interest rates work the sums in the favour, especially given the rent rises of the past couple of years.
We’re also seeing a growing number of people ‘upsizing’ in our area. Many of these buyers take out substantial mortgages to fund their purchases and interest rate cuts could mean they have more to offer for a home, driving prices further north.
RBA data shows that the areas that benefit most from interest rate cuts are often those with the most expensive properties and highest mortgage rates. Those suburbs with a constrained housing supply, often due to a lack of vacant land or building restrictions, also tend to perform well.
Given the inner eastern suburbs tick all of these boxes – especially when it comes to larger apartments and homes – we might expect our area to be one that sees the most benefit from lower interest rates.
Our forecast for 2024
Finally, it’s worth noting that each one of the big four banks is forecasting Sydney property prices to rise this year. ANZ Bank is the most bullish, suggesting the Sydney median will lift by between six and seven percent.
We also expect prices to slowly build over the year, as more people and properties enter the market. We also expect that our local area will outperform the Sydney average.
As always, however, my advice to anyone thinking of buying or selling is to do it when it suits you, rather than waiting for interest rate cuts. After all, by then, the market may have moved again and conditions may not be as favourable as they are right now when it’s a more neutral market.
Want more?
If you’re thinking of buying or selling in 2024, contact my team today.
