2023 was a strong year for our local property market but what does 2024 have in store?
2023 was a strong year for Sydney’s property market, with the citywide median dwelling value rising 11.9% between January and December to stand at $1,125,533, according to CoreLogic. But what should we expect over the next 12 months?
Another year of gains ahead?
Before we go too far, it’s worth exploring what the experts say, and by and large they’re forecasting 2024 to be another year of growth.
Each one of the Big Four banks believes the city’s property market is likely to rise. However, none see the same gains that we witnessed this year on the horizon, with each of them forecasting a rise of between three and five percent.
When it comes to the property portals, realestate.com.au’s Proptrack also forecasts a gain of five percent.
Domain is more bullish and believes house values will rise by between seven and nine percent. It also expects apartment values to lift by between three and five percent.
Still, the property market rarely acts in unison, and we believe that here in postcode 2011, we may see more substantial price rises.
Property prices are always set by the laws of supply and demand. And we anticipate that, over the next 12 months, supply should remain limited, while demand is likely to rise.
Investors and first home buyers to come back?
As we wrote at the end of last year, 2023 was really a tale of two markets. While prices rose strongly overall, the gains weren’t shared evenly.
There was noticeably strong demand from downsizers and prestige buyers, which drove the market for large apartments and houses rapidly upwards. However, investors and first home buyers were less active and the entry-level market was less competitive.
We expect this may change in 2024, with both buyer groups re-merging to compete for one- and two-bedroom apartments in our local area.
A key reason for this is that, with inflation under control, most economists see interest rate cuts on the horizon – most likely in the second half of 2024. If the RBA does begin cutting rates, this will immediately benefit both buyer segments, who tend to be heavily influenced by interest rates.
First-home buyers should also receive a boost from the fact that the state government’s transfer duty exemption and concession scheme has been widened. Eligible first home buyers no longer pay any transfer duty on homes valued up to $800,000 and then receive a concessional rate up to $1 million.
Given the median Potts Point apartment value is $897,500, this brings a lot of properties in our area into play.
And that’s not the only benefit first home buyers will receive in 2024. Many will also qualify for 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).
Again, this represents a fantastic saving, with the average cost of LMI on a $900,000 property and 5% mortgage coming in at $56,512.
Rising rents a factor too
It’s not only the ‘pull’ factors of government schemes and lower interest rates at play either for first home buyers. There is also the ‘push’ factor of higher rents.
Many, if not most, tenants intend to buy at some stage, and the high cost of renting should mean more will be tempted to get onto the property ladder for the very first time.
After all, the median rent in postcode 2011 rose 15.3% over the past 12 months to stand at over $810, according to SQM. In other words, the average tenant is paying more than $42,000 a year now to live in our area.
Rising rents will tempt investors to enter the market too. The median yield in Potts Point is now close to 4% – the highest it has been in some time. And, with the prospect of capital growth on the horizon as well, this could be a great time to add to a portfolio or become a landlord.
We expect that these factors could drive ‘bottom-up’ price growth in our local market.
Continued strength at the top
But that won’t be the only direction from which prices come under pressure. The top of the local property market is incredibly strong right now and shows few signs of slowing down.
Throughout 2023, we saw several premium sales, with building, street, suburb and even city records being broken. This included a new Eastern Suburbs apartment record when we sold an off-the-plan penthouse apartment in the Billyard Avenue development for circa $30 million.
Many of the prestige buyers in our local area are downsizers, who have recently also sold their family homes for high prices. They’re after large apartments including penthouses and sub-penthouses, that can offer the very best of urban living, including space, luxury and a killer view.
There simply aren’t enough properties to meet their demands and, so long as this continues, prices will stay exceptionally strong in this segment too.
The growing family market
Finally, it’s worth mentioning that these aren’t the only buyer groups in the market. Over the past few years we’ve seen a real trend for families to forego life in a suburban house, and instead opt for a quality apartment close to the city.
Some of these buyers have already had a taste of living in our area before kids and choose to upgrade locally rather than moving out as their family grows. However, an increasing number are selling the family home and moving into our area.
This is another factor putting real pressure on the price of larger apartments and houses – especially those that have room for a separate living area and even a home office. We expect this change in people’s lifestyles and expectations will continue to drive prices upwards this year.
Our forecast for 2024
Based on these factors, we too expect that the market will continue to rise in 2024. We also expect that our local area will outperform the Sydney average.
That said, my advice to anyone thinking of making a move is to do it at a time that suits you, rather than waiting for the market conditions to change.
If you’re thinking of buying or selling in 2024, contact my team today.