Sydney’s Housing Market- March 2023
The Sydney real estate market has been on a rollercoaster ride in recent years, experiencing both significant growth and downturns. However, in 2023, the Sydney housing market began to see unprecedented growth. Despite this apparent resurgence, the reality of the housing market remains challenging for aspiring and existing homeowners as rising interest rates and inflationary pressures are causing Australians’ standards of living to plummet.
Despite the RBA’s 10th consecutive rate hike, which brought the cash rate up from 3.35% to 3.6%, real estate agents are beginning to see signs of bottoming out in the housing market. Accordingly, it is expected that there will be marginal growth (in prices), but this is also heavily reliant on the RBA’s monetary decisions. According to PropTrack, Sydney’s median home price has begun to recover as it increased by 0.36% over February, following a 7% drop over the preceding year. Analysis of property transactions over February and March also shows that record prices were paid for properties in at least 20 suburbs - an intense progression not seen since the 2021 lockdown-era property boom. With listing data showing that there are 29% fewer new listings in March compared to the five-year trend and 38.5% fewer than at this time last year, it is clear that this growth is a product of rampant demand and limited supply. Much of this increased demand is from first-home buyers rushing to capitalise on the government’s fiscal measures which include first-home buyer schemes. With borders opening, increases in immigration have also put upward pressure on demand. However, some argue that this is “a bit of a false dawn, a dead cat bounce” as headwinds from future rate hikes are still to come and the market could weaken further as the full effects of the rate rises transmits through monetary lags.
The slow recovery in Sydney’s median house prices is also not indicative of positive economic development as standards of living have been threatened with Sydney’s housing market ranking as the second least affordable in the world for the second year running. Data from the National Affordable Housing Consortium shows that a single person on an average salary can afford just 13% of properties listed for sale in Sydney, with the situation being worse for households with two average earners as they can only afford 3% of properties in Sydney. In particular, early career essential workers have been hit hard as there is no longer a single local government area across metropolitan Sydney or Melbourne where housing is affordable. Analysis has found that more than 36,000 essential workers across greater Sydney have been forced to live in cramped and crowded shared homes as ballooning housing costs are pushing them out of living in the inner city. In the face of burnout from longer commutes to work in the CBD and financial stress from mortgages and rent, there is a risk that housing access issues for essential workers could pose problems for employee recruitment and retention in industries that are already suffering from staff shortages. This raises concerns about the government’s ability to maintain unemployment rates at the current 3.5% and stimulate productivity growth in Australia, which has already been lagging at a six-decade low. Accordingly, it is critical for the government to intervene by increasing the supply of homes and implementing fiscal policies that improve housing affordability, especially for low-income earners. Without concerted action, the dream of home ownership may remain out of reach for many in Sydney.