Sydney property prices fall as national market slows

Sydney has become the latest capital city to lapse into negative territory for monthly property prices growth.

October’s national Home Value Index released Friday (1 November) by CoreLogic showed that dwelling values rose just 0.3 per cent in the past month, but it was still enough to notch up 21 consecutive monthly gains.

While it was the usual coterie of mid-sized state capitals – Perth, Adelaide, Brisbane – that did the heavy lifting, Hobart proved to be a surprise packet.

While units in the Tasmanian capital slid further, house values leapt 1.2 per cent to deliver an overall monthly dwelling increase of 0.8 per cent, in third place ahead of Brisbane’s 0.7 per cent. Darwin led the price falls, down 1.0 per cent.

But the biggest takeaway from the latest price data release was Sydney’s reversal.

The decline in Sydney’s monthly median dwelling value marks the first retraction since January 2023 and signals a pivotal moment in the housing market.

The shift could indicate a cooling trend after a prolonged period of growth, potentially affecting buyer sentiment and investment strategies, according to Allen Habbouchi, Head of Project Sales and Distribution, aussieproperty.com.

“Unevenness in the market is evident, with certain areas and property types experiencing greater declines,” Mr Habbouchi told API Magazine.

“Suburban regions, particularly those that saw rapid price increases during the pandemic, might be sliding the most while, conversely, premium properties in desirable inner-city locations are likely to remain more resilient, supported by ongoing demand from affluent buyers and investors.”

Looking towards 2025, he said it will be essential to monitor how different market segments respond to economic shifts and changing buyer preferences.

“Areas with strong infrastructure, amenities and lifestyle appeal may continue to attract buyers, while regions overly reliant on speculative growth could face more significant challenges.

“High interest rates are a key factor deterring investors, as the cost of holding and maintaining the investment far outweighs any growth potential even with the increases in rent it still does not equate to a good investment, especially in the unit market.

“Those who bought because of FOMO (fear of missing out) paid high and are now struggling to hold due to cost of living pressures and have no choice but to sell unfortunately at a lower price than purchase.”

Eleanor Creagh, Senior Economist, REA Group, said several factors were at play in stifling the Sydney real estate market.

“The increase in properties hitting the market in Sydney this year has been met with strong demand, but is a contributor to slowing price growth, along with affordability constraints and sustained high interest rates.”

Market losing momentum

While the mid-sized capitals are still leading the pace of value growth, these markets are also losing momentum.

Perth continues to lead the nation with a 1.4 per cent rise in values over the month, but this is well down from the growth seen over February to June period earlier in the year when monthly gains were averaging more than 2 per cent.

Adelaide values have risen by more than 1 per cent each month since March, but conditions look to be slowing here as well with October’s 1.1 per cent gain marking the lowest monthly rise since June. Brisbane’s performance was the lowest since July.

Tim Lawless, Research Director, CoreLogic noted that the stronger performance across the more affordable end of the market is a consistent theme across the capital cities.

“A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first home buyers in the market is the most likely explanation for stronger conditions across the lower value cohorts of the market.

“The past three months has seen the lowest quartile either record a higher growth rate or smaller decline relative to the upper quartile or broad middle of the market across every capital city except Canberra.”

Total listings are now 13.2 per cent above the previous five-year average in Sydney and 13.0 per cent higher in Melbourne, contributing to their weaker overall performance.

In Perth, listings are 20.6 per cent higher but this is coming from an exceptionally low base, so demand is still outstripping supply. Its median value edged above the $800,000 mark this past month on the back of annual growth of 22.6 per cent.

REIWA CEO Cath Hart said on Thursday (31 October) that houses and units continue to sell quickly.

“Last week the ABS announced WA’s population is now over 3 million, which has been largely driven by overseas migration,” she said.

“The ongoing growth in population has also seen strong and sustained demand for housing.

“While new home build times are now recovering and being completed in quicker timeframes, Perth’s overall housing completions are still low, which is maintaining the strong demand for established homes and the continued upward pressure on prices.”

Ms Hart said there would need to be an unexpected change in current conditions to significantly slow Perth dwelling price growth, but there were a couple of factors that could affect the rate of growth.

“Factors that might impact the current price trend for Perth dwellings over the coming months and into the first half of 2025 include the upcoming elections, both federally and in WA, as well as potential changes to interest rates.

“We know market activity often slows in the lead up to elections as buyers and sellers wait to see the outcome. This is especially so when housing is one of the key policy areas — as will be the case in both the upcoming federal and WA elections.

“We have a state election in early March and the federal election has to be held before May. These are likely to have some effect on market sentiment and activity.”

The gradual easing of the national property market would likely be sustained because of ongoing economic factors, according to Domain’s Chief of Research and Economics, Dr Nicola Powell.

“This deceleration can be attributed to affordability constraints, primarily stemming from wages not keeping pace with rising property prices, compounded by the ongoing cost of living crisis.

“As prices continue to climb, the buyer pool becomes increasingly limited.

“Consequently, as purchasing power diminishes, buyers find it more challenging to remain competitive, leading to a further slowdown in activity.

“This combination of factors has left households feeling significant financial pressure, and we’re seeing this play out in subdued house price growth,” she said.

More new homes being built

An uplift in home approvals in September has been welcomed but is still lagging the levels needed to meet goals aimed at extinguishing the housing crisis.

The total number of dwellings approved rose 4.4 per cent in September to 14,842, after a 3.9 per cent fall in August, according to seasonally adjusted data released Thursday (31 October) by the Australian Bureau of Statistics.

Approvals for private dwellings excluding houses (which includes townhouses and apartments) rose 4.7 per cent to 4,653 but remain subdued after a 13.5 per cent fall in August.

Over the last 12 months, only 56,186 apartments and townhouses were approved. Over the same period in 2017-18 approvals were at 102,323.

Property Council Group Executive Policy and Advocacy, Matthew Kandelaars, said despite the increase in homes approved, there was still work to do.

“While it is pleasing to see an uplift in the number of homes approved, we won’t meet our housing targets unless we keep increasing this at pace,” he said.

“Consistent results like this, month after month, are essential.

“It is particularly apparent that we are just not building apartments at the levels we used to, and those approvals remain below where they need to be.

“We only approved about half of the apartments over the last 12 months than in the same period in 2017-18. High construction costs, sluggish planning processes and taxes that hinder apartment projects are now limiting supply.”