Housing shortage in NSW but investors thin on the ground

To date, the real estate market in NSW has had a subdued start to 2025.

Prices are continuing on a flat trajectory. Reports of miniscule monthly price declines must be viewed in the context of the major growth in values during and following the pandemic.

Auction volumes have been relatively low, which is unsurprising for this time of year, and clearance rates have been solid.

But now, school’s back after a very long break (ask any parent!). With this return to normal programming, we expect to see buyers becoming more active in the market in coming weeks.

On the buying front, owner-occupiers are making comparatively more noise. Current feedback from REINSW members suggests there’s not a great deal of growth in investor numbers.

So, could a potential rate cut next week shift market activity up a gear?

It’s possible but equally, any impacts of reduced borrowing costs may only be felt over a longer period of time.

The market is primarily driven by two factors: demand and supply, and access to capital.

An interest rate decrease changes the access to capital scenario. Property prices are not set by vendors or agents, but by purchasers in competition. If purchasers have access to more capital with which to compete, we could see prices take a new upward turn, albeit slight in the short term.

However, when it comes to demand and supply, the housing crisis is entrenched. The need for more homes is the greatest societal challenge faced in NSW and there can be no quick turnaround on this score.

It doesn’t mean we should stop trying, though.

Reform without burden

This year, the REINSW is doubling down on its housing supply focus, in alignment with the Real Estate Institute of Australia’s (REIA) recently announced seven-point housing policy.

Attempting to clear the path for new developments through initiatives like the Transit-Oriented Development program is part of the solution. But alone, it’s incomplete.

We will be stressing to Government the need to hold councils accountable to meet their housing targets and support the development community.

After all, it’s the private sector that is expected to take the risk and do the building.

If the risk-reward does not stack up, no amount of zoning changes will result in the new homes we need.

A major culprit here is tax. It’s time for other industries to contribute to government’s tax revenue and remove some of the burden from property.

Technology is another major focus for REINSW and we will continue to guide members through this ever-changing space. Agents know they must embrace tech innovation, consumers expect that they will, and yet real estate remains at its heart a person-to-person industry.

Supporting agents in finding that balance will be important.

Anti-money laundering and counter terrorism finance is going to be a huge challenge for agents. REINSW will also be supporting members with the development policies and procedures and working closely with AUSTRAC to ensure the industry perspective is heard.

No-one opposes a tougher stance on crime but it’s often small businesses – who can least afford it – burdened with the cost of additional administration and compliance. We will be emphasising to government the need for the additional compliance to align with existing workflows and to guide our members through the practical implications of the coming changes.

Some overseas jurisdictions have introduced similar obligations and this has led to the need for dedicated compliance staff. It’s a situation we need to avoid for small businesses here, in light of the other challenges they face in 2025 and beyond.