The report highlighted that the fastest and sharpest market recovery Sydney has ever seen, occurring from June 2020 to March 2022, is over. During this period, prices jumped 40% to $708 per day, an unprecedented level of growth for the industry.
“House prices across all of Sydney’s suburbs have seen price increases over the past year, ranging from 6% to nearly 58%, widening the wealth gap between homeowners and non-homeowners, and stretching the ability of others to grow taller,” Domain said. said the head of economics and research, Dr Nicola Powell.
The group reported that Sydney’s housing market has now entered a downturn, with the city experiencing one of the most severe market declines of any capital city. The last major downturn occurred between 2017 and 2019, when house prices in Sydney fell by 13.8%.
However, the current decline is different given “rising interest rates, the increased cost of a home loan and reduced borrowing capacity at a time when the cost of living is soaring” .
In parts of Sydney, such as the eastern suburbs, the downturn has seen house prices fall by 8.5% since peaking in June 2021, while similarly in Sutherland prices have fallen by 5.5% since their peak last December. year.
However, Dr. Powell offered some good news for investors and homeowners, based on the company’s research.
“Historically, downturns have been shorter and less severe than the previous rally. We expect the slowdown in price growth to continue and buying conditions to improve for buyers, but there is little likely we will see a return to pre-pandemic prices,” she said.
As for how the future of the market will unfold, Dr. Powell said there are a number of factors that will define the trajectory of the market over this period, the most notable being the pace and magnitude of interest rate increases.
“The current level of household indebtedness makes Australian mortgage holders susceptible to higher interest rates which will squeeze household budgets. The higher level of indebtedness means the RBA will not need to increase its rates as much as it has done in the past to calm inflation,” she said.
“Property prices are partly driven by momentum, which means that when prices fall it will likely drive further price declines – fear can fuel fear, both positively and negatively.”
The decline in house prices in New South Wales, along with various federal and state government programs and strategies – including the Home Buyer’s Assistance Scheme and the Government of New South Wales’ proposed stamp duty changes New South Wales – will help increase affordability and accessibility.
Dr Powell praised the federal government’s new purchase assistance program for its ability to bring buyers to market 11 years earlier than they previously could have, but acknowledged that “it can only help 6% of first-time home buyers nationwide each year.”
While pursuing stamp duty reform, she believes, will spur the “re-adjustment” and resolve supply issues across the state.