Sydney house and unit prices have risen, marking the end of the city's steepest property downturn on record, but experts say downside risks remain and a sustained rebound is unlikely yet.
Sydney house prices lifted 1.3 per cent last quarter, or about $18,300, to a median sale price of $1,459,856, the latest Domain House Price Report, released on Thursday, shows. It is the first quarterly increase in a year, and leaves the median price 8.4 per cent below its early 2022 peak.
Unit prices increased 0.7 per cent over the three months to March, to a median of $758,664 – 5.5 per cent below their late 2021 high.
Domain's chief of research and economics Dr Nicola Powell said Sydney's property downturn appeared to have bottomed out late last year, bringing an end to the city's steepest house price decline on record of 9.6 per cent from the March to December quarters in 2022.
She attributed price growth to the strong return in migration and a highly competitive rental market that increased buyer demand, at the same time as sellers have been holding back.
“New listings over March were … 23 per cent lower than this time last year,” she said, adding total supply was down 9.3 per cent. “[It's] creating a more competitive environment which is why we are likely seeing prices increase.”
Powell said values were likely to move sideways until a new price cycle was sparked by cash rate cuts.
Downside risk also remained, she warned, particularly if rates continued to climb or an increase in homes for sale – due to pent-up transactions or mortgage stress – was not matched by increased demand.
The upper end of the market led the uptick in prices. House prices jumped 7.4 per cent in the city and inner south over the quarter, 6.9 per cent in the eastern suburbs – a $220,000 increase, 5.5 per cent in the North Sydney and Hornsby region, and 5 per cent in the northern beaches. Meanwhile, values in the city's west and south-west continued to decline.
Powell said the upper end typically led price movements, and was hit harder in the downturn so had greater losses to recoup.
Westpac senior economist Matthew Hassan expects Sydney prices to lift 1 per cent this year, in a sharp revision this week to previous forecasts for an 8 per cent drop.
Strong migration, lower numbers of homes for sale and increased construction costs had stabilised prices, Hassan said. The impact of reduced borrowing power was also smaller than previously expected.
“[The market] has essentially bottomed out, and is showing convincing signs of stabilisation, [but] it's not yet in a position to swing into a sustained appreciation and there will be some slippage,” he said.
Affordability constraints and still weak buyer sentiment would limit any sustained recovery in prices until next year, when he forecasts values to rise 5 per cent off the back of rate cuts.
*** Source: Kate Burke and Melissa Heagney-Bayliss - Sydney Morning Herald ***