The Sydney Property Market Forecasts & Review – Investment Outlook for 2024

Sydney Houses and Units Forecasted to Rise 15.8% and 23.4% in just 3 years

Recent data suggests that Sydney property prices are set to soar even further by up to 23% over the next three years. According to the Residential Property Prospects report, which looks ahead to 2026, unit prices in Sydney are projected to outpace house prices until June 2026.

Oxford Economics is optimistic, expecting a robust 23.4% increase in unit prices during this period, while house prices are predicted to climb by 15.8%. If these forecasts hold true, Core Logic estimates that Sydney’s median unit value will jump over the $1 million milestone to $1,029,869, and the median house price will surpass $1.5 million, reaching $1,621,930. Exciting times ahead for Sydney’s real estate market!

Sydney Property Market in 2023

By the end of 2023, the median house price in Sydney bounced back impressively. According to CoreLogic, Sydney houses ended the year sitting at $1,400,630, while units finished at $834,578. This showed a remarkable annual price growth of 12.5% for houses and 7.7% for units, proving the housing market has fully recovered from its 2022 downturn.

But what exactly contributed to this strong recovery? According to experts, there are several factors at play.

Economic indicators

Forward estimates for the NSW state economy project a surplus of $333 million in 2024-25, which is expected to increase to $1.166 billion in 2025-26. This indicates a strong economic outlook, with potential flow-on effects for the property market. At just 3.27%, NSW’s unemployment rate is also below the national average, further boosting consumer confidence and spending power.

Interest rates on pause

While the Reserve Bank of Australia (RBA) decided to keep interest rates on hold at 4.35% in December 2023, they also strongly hinted at the possibility of further increases coming in 2024. However, many economists are tipping the likelihood of a rate cut in 2024, rather than additional increases. Interest rates on pause would see potential buyers entering the market before rates potentially rise again, contributing to increased demand and prices.

Infrastructure developments

Sydney’s economic growth is expected to be boosted by major infrastructure projects like the Western Sydney Aerotropolis, Sydney Metro, and the Western Harbour Tunnel. These projects will create jobs, attract businesses to the city, as well as enhance transportation and connectivity, contributing to Sydney’s overall livability and attractiveness.

Population growth

Sydney is expected to see an influx of 1.6 million people in the next 20 years, with 900,000 of them settling in Western Sydney. This significant growth means both businesses and residents will be drawn to the area, increasing demand for property and driving prices upwards.

2023 Property Prices

Housing Market Trends

Sydney’s housing market is displaying robust growth as a result of increased buyer confidence and improved economic conditions. Suburbs within 20km of the CBD, particularly in the Eastern Suburbs and Northern Beaches, are witnessing significant price appreciation. Western Sydney is also experiencing steady growth, thanks to not only its affordability but also major infrastructure developments like the Western Sydney Airport.

Apartment Market Trends

Compared to the strong growth in the housing market, Sydney’s apartment market is experiencing a more subdued growth trajectory. However, with the slowdown in apartment construction and increasing demand for affordable housing options, this sector will likely see strong growth in the coming years.

Where were the most sought-after investment properties or suburbs in Q1-Q3 2023?

Upper North Shore

Sydney’s Upper North Shore remains a highly sought-after area for property investment due to its prestigious schools, family-friendly environment, and strong community. With beautiful parks, large land sizes, and an easy city commute, it has experienced stable price increases over the years. Positioned in the middle ring of the CBD, the Upper North Shore showed stable growth and resilience during the pandemic, making it a safe option for investors.

Lower North Shore

Catering to young professionals, the Lower North Shore boasts beautiful waterfront properties and a vibrant cosmopolitan lifestyle. Its proximity to the city center makes it highly desirable for those working in the CBD. With strong demand from both owner-occupiers and investors, this area is expected to experience steady growth.

Inner West

The Inner West has become increasingly popular due to its eclectic mix of modern apartments, terrace houses, and traditional workers’ cottages. With vibrant cafes, restaurants and a lively arts scene, it has become a hub for young professionals and families looking for a convenient lifestyle. The area is also well connected with public transport, making it an attractive option for investors.

2024 Predictions: Where is the Market Headed?

New data indicates that Sydney property prices are poised for another significant surge. According to the Residential Property Prospects report, which looks ahead to 2026, unit prices in Sydney are projected to outpace house prices until June 2026.

Oxford Economics is optimistic, expecting a robust 23.4% increase in unit prices during this period, while house prices are predicted to climb by 15.8%.

Sydney’s rental market, as per SQM Research, is under significant stress with record-low vacancy rates, surging rent prices, high demand, and a growing population.

While the recent state budget announcement by NSW Labor addressed housing issues with plans for supply boosts, affordable housing, and planning reforms, experts question their effectiveness. Limited funding aims to deliver fewer than 5,000 homes by 2040, raising concerns that these measures may not adequately address the escalating crisis.

Property investors are well-positioned to address the growing need for housing in Sydney. In this high-demand, low-supply rental market, investors have the potential to achieve strong capital growth and high rental yields. Savvy investors can not only benefit from the current hot market but also make strategic investments in up-and-coming areas to capitalise on future growth.

As we eagerly anticipate what else 2024 will bring, pressure on housing demand in Sydney will continue due to population growth, limited supply, and ongoing migration to major cities.

Tips for Investing in Sydney in 2024

Focus on Inner and Middle-Ring Suburbs

• Look for properties in areas with convenient access to essential amenities, beaches, parks, and vibrant local hubs.
• Aim for a 20-minute neighbourhood, where necessities are within easy reach, enhancing the overall quality of life.

Consider Long-Term Capital Growth:

• Emphasise the importance of capital growth over immediate cash flow in property investment.
• Choose well-located properties in Sydney’s inner and middle-ring suburbs, leveraging the long-term potential for increased value.

Strategic Property Selection:

• Follow a strategic approach, considering factors like intrinsic value, historical capital growth, rental yields, and potential for future development.
• Consider properties with unique features such as water views, exclusive location, or heritage charm that can potentially drive up its value.

Summary

Sydney’s property market has demonstrated its resilience by recovering from the 2022 downturn, showcasing its ability to adapt to economic shifts. As the year ahead unfolds, key factors such as interest rates, infrastructure developments, and population growth will undoubtedly shape the market’s trajectory.

While challenges persist in the rental market, property investors find themselves in a favourable position to meet the surging housing demand, promising potential for robust capital growth and attractive rental yields. By strategically investing in inner and middle-ring suburbs and focusing on long-term capital growth, investors can navigate the evolving landscape successfully.

While there is no one perfect time to enter the property market, thorough research, and a strategic approach can help individuals make informed decisions and achieve long-term wealth creation through property investment.