What To Expect From The Property Market In 2024

January 12th, 2024 - by Brad Gillespie

Last year was a solid year for Sydney.

CoreLogic data showed the median Sydney-wide property price rose 11.3% of the year to 30 November, taking the median home value to $1,125,533.

As we wrote in December, this was the result of several market factors including low supply, rising buyer demand, and an unusually strong rental market.

So should we expect the market to perform the same way over 2024? Here are four factors we believe will influence how property prices perform in Sydney’s inner city and inner west this year.

1. Continued low supply levels

Property prices are set by the laws of supply and demand, and over the past year, there has been something of an imbalance between them.

Part of the reason for that has been a lack of new development. In fact, ABS data shows the total number of apartments being built across Australia fell 11.8% in the June quarter and that the number of new projects happening has been on a downward trajectory since 2019.

Meanwhile, the number of properties available for sale has been relatively stable since 2020, but below the levels we experienced in 2018 and 2019. And our city’s rental vacancy rate is the lowest it has been in over a decade.

At the same time, the number of people looking for somewhere to call home is increasing.

In the year to June 2023, Australia experienced its highest population growth rate in recent history, with the number of residents rising 2.4%. This growth included more than 500,000 new arrivals from overseas - of which close to 175,000 chose to settle in NSW, mainly within Sydney.

So, with more people needing a home and fewer homes being built, we’re likely to see growing pressure on both rents and sales prices over 2024.

2. Potential interest rate cuts

Interest rate hikes have become a defining feature of our property market. Between May 2022 and November 2023, the RBA took the official cash rate from 0.1% to 4.35% - the most rapid rate rise in history. The RBA argued the rate hikes were necessary to combat rising inflation.

What has amazed many commentators has been the resilience of our property market. Despite the citywide median falling -12.4% between January 2022 and January 2023, it has since rebounded by 11.9%, according to CoreLogic, despite much higher interest rates.

Now, it seems inflation may be under control, and many commentators believe we’ll see a reduction in the official cash rate - most likely in the second half of 2024.

If this happens, it could encourage people to borrow more, and that in turn, could impact property prices.

3. A return to apartment living

One of the noticeable trends during the height of the pandemic in 2020 and 2021 was a shift away from apartment living to houses. By 2022, Sydney’s median house price had become almost double the median apartment price, even though the gap had been only 54% just prior to the pandemic. One of the key reasons for this was that people were spending more time at home - including work-time - and wanted more space.

Over 2023, however, we’ve seen interest return to apartment living, and in some inner city and inner west suburbs growth in apartment values has outpaced growth in house values. According to realestate.com.au data this includes Marrickville (8.7% vs 3.5%) and Mascot (1.2% vs -4.3%).

We expect, as Sydney’s population continues to grow and more people want to call the inner city and inner west home, we’ll see apartment prices continue to grow. We may even see apartment prices outperform houses more broadly for the first time in five years.

4. A growing number of first-home buyers

Rising interest rates and rising dwelling prices have made it tough to be a first home buyer in Sydney’s inner city and inner west lately. We’re hopeful that reforms to state and federal first-home buyer schemes will help redress the balance.

For instance, in June 2023, the threshold for homes eligible for transfer duty relief under the First Home Buyer Assistance Scheme was lifted to $1 million and homes under $800,000 eligible for a complete exemption.

This brings into play so many more homes in our local area, especially apartments. After all, according to realestate.com.au data the median apartment value in Alexandria is $870,000, in Newtown it’s $732,500 and in Chippendale it’s $758,000.

Meanwhile, the First Home Guarantee Scheme makes it easier to get onto the property ladder by helping first home buyers borrow 95% of a home’s value without having to pay expensive lenders mortgage insurance.

Taken together, the schemes mean a first home buyer could potentially buy the median Newtown apartment with a $36,625 deposit and pay no transfer duty.

When you consider that rising rents are also influencing the buy vs rent equation, we believe 2024 may be the year more first-home buyers get onto the property ladder.

Potential challenges

While we’re optimistic about our local property market in 2024, there are some potential challenges too. There’s always the chance inflation won’t come under control, and the RBA won’t reduce rates. There’s also the possibility that interest rates and rising cost of living pressures could bring about a recession.

However, we believe that in the balance of probabilities, these are less likely scenarios and we’re likely to see another strong year for Sydney’s inner city and inner west property market.

The Big Four banks seem to agree, and between them are forecasting another strong one for the property market with rises of 4% to 6%.

Want more?

Contact our team today to find out more about how we can help you buy and sell in Sydney’s inner city and inner west.