Sydney’s home values rose nearly 1 per cent in the past four weeks, the strongest gain over a four-week period since January 2022, and accelerating from the earlier-than-expected streak that started at the beginning of the year, data from CoreLogic shows.
In the past 15 days alone, Sydney prices have increased by 0.5 per cent and look set to edge higher, at least in the near term, amid low stock and strong demand.
Sydney’s home value rose nearly 1 per cent in the past four weeks amid low listings and stronger demand, according to CoreLogic.
While the property market’s resilience has emerged sooner than many expected, most experts say it is too early to call the bottom of the cycle, with more downside risk to come.
“A 0.8 per cent lift in just four weeks is pretty large, but typical of the kind of price changes you get in more expensive markets like Sydney,” said Eliza Owen, CoreLogic head of research.
“What’s surprising is the timing. I would not have expected to see a material pivot from the downswing until rate rises have been paused.”
Melbourne also inched slightly higher, rising by 0.2 per cent, while Perth was up 0.1 per cent over a four-week period.
“It’s a bit of a surprise to see this trend play out in the housing market just yet, given there’s probably at least one more rate rise to come this year,” Ms Owen said.
“But there are certainly a few factors working in favour of these markets, including lower prices which might be enticing people back to the market.
“Stock levels are low relative to where they’ve been historically. And at the margins, there may also be wealthier renters or prospective renters who are opting to buy rather than tough it out in the rental market.”
Despite the small lift in prices in the past few weeks, Sydney is still down by 13.2 per cent and Melbourne by 9.5 per cent compared to where they were at the peak in early 2022.
Stock levels are also lower compared to historical trends. In the past four weeks, new listings across Sydney have dropped by 18 per cent compared to a year ago and were down by 19 per cent in Melbourne.
“I don’t think we’ll see a dramatic increase in listings, at least in the short term, mainly because vendors are still not confident about pricing,” said Sydney-based selling agent Shannan Whitney of BresicWhitney. “Until we see a pick-up in vendor sentiment, I think stock level will stay low.”
Paul Bloxham, HSBC chief economist, said the growing imbalance between supply and demand has been fuelling the price momentum currently seen in Sydney.
“I think the surprise upside is a positive sign that we’re starting to see some signs of stability in the Sydney market already, which is a bit earlier than we originally expected,” Mr Bloxham said.
“Part of the reason for this is that we’re seeing a fairly tight market in terms of available supply of properties. At the same time, we’re seeing the impact of the reopened border and the boost to population growth that we’re getting from that migration.
“We often focus on the interest rates as a key driver for house prices but actually, the supply and demand side is equally a strong force in the housing market.”
The housing downturn has been easing since last September, with home values nationwide stabilising last month.
Independent economist Stephen Koukoulas said the market was likely getting close to the bottom, if not already there, as prices continue to stabilise.
“The key issue to me is that we’ve got a huge increase in population over the last 12 months with another substantial increase over the next 12 months at least, and we’re simply not building enough dwellings,” Mr Koukoulas said.
“I think the increased rental demand might be spilling over into actual prices now, and I think that buyers are alert to the fact that we’re getting very close to the top of the rate cycle.
“The other thing is even though the economy is slowing down, the labour market is still pretty strong and wages are still picking up, albeit slowly, which are also helping to support the bottoming out of house prices in Sydney.”
But while the price increases in recent weeks suggest the tailwinds for housing demand are winning over the headwinds of higher interest rates, the market is not out of the woods yet, according to Shane Oliver, AMP Capital chief economist.
“The problem is that interest rates are still continuing to impact the market and my inclination is to still think the weakness could go on for a little bit longer,” Dr Oliver said.
“It’s quite possible that we may have seen the worst and are now in the recovery, but the negative impact of higher interest rates still has further to run, and we’re probably looking at some sort of significant economic slowdown ahead of us.
“But other factors are also providing support such as the return of immigrants and the lack of supply. This makes the market difficult to call.”
Pat Bustamante, senior economist, Westpac Business and St George, said prices were unlikely to rise substantially until next year.
“In past cycles, it takes a quarter or two after the RBA goes on hold for prices to bottom out,” Mr Bustamante said.
“We’re expecting a similar pattern this time around. It’s only when interest rates decline towards neutral levels that we expect to see significant price increases – this is likely to occur towards the end of 2023 and into the start of 2024.”
John McGrath, chief executive of McGrath Estate Agents, shared a similar view and added that “while I believe Sydney and Melbourne have both reached the bottom of the cycle it would be dangerous to extrapolate any trend from the last few weeks and attempt to label it a shift.”
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