06.21.2023 Local News

Market Report: Winter 2023

Market Report: Winter 2023

Sydney’s property prices have been rising sharply in the first half of 2023.

We explore what’s happening on the ground here in the Eastern Suburbs.

So far in 2023, the Eastern Suburbs property market has been very different from 2022. Last year was all about dwindling demand and falling prices. This year is all about a strong recovery, even in the face of high interest rates.

Sydney property market snapshot

We’ve written previously that when the Sydney real estate market turns, it tends to turn rapidly. And that is exactly what has happened once again in the first half of this year.

In just four months between 1 February 2023 and 31 May 2023, Sydney’s median dwelling value lifted 5.3% to $1,052,810, according to CoreLogic. Even though interest rates are now at their highest level since April 2012, the pace of growth in the property market seems to be increasing. In May 2023 alone, prices lifted an average of 1.8%.

One of the startling things about the boom of 2020-2021 was that growth in house prices almost doubled that of apartment prices. As the market takes off, we’re seeing that same trend play out again, with the median apartment value rising 3.3% over the past quarter compared with 5% for houses.

Eastern Suburbs Market Snapshot

Here in the Eastern Suburbs, we’ve also noticed a definite change in the wind over the first half of this year. There are many more buyers per property than we’ve seen in some time, with open homes generating a buzz once again.

This is reflected in the auction clearance rate, which Domain reports was over 75% for the weekends of 3 June and 10 June.

Where we’re especially seeing activity at the top end of the market, with multiple bidders at auction and off market sales attracting interest. Despite rising interest rates, we’re actually seeing record sales.

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Top performers over the past 12 months

The table below further illustrates that it is at the top end where prices tend to be rising most rapidly.

When reading these figures, keep in mind that the citywide median is well down on this time 12 months ago despite this year’s growth. In fact, the average Sydney property value fell by -8.2% between May 2022 and May 2023, and prices are still -9.6% below their January 2022 peak, according to CoreLogic data.

Suburb Property type Median value Growth (past 12 months)
Woollahra Four-bedroom house $5.39 million 12.3%
Double Bay Three-bedroom apartment $3.777 million 7.9%
Bronte Four-bedroom house $5.45 million 3.1%
Coogee Five-bedroom house $5.711 million 20%
Coogee Three-bedroom apartment $2.658 million 16.2%
Potts Point Three-bedroom apartment $4.6 million 15%
Kensington Four-bedroom house $4.1 million 38.5%

What’s behind the market turn?

There are several factors underpinning the local property market.

  • Limited impact of interest rate rises. While the RBA has lifted interest rates more rapidly than at any time in history, this isn’t affecting all people. Many borrowers chose to fix their mortgages during the pandemic. More importantly, however, many buyers (especially downsizers and prestige buyers) tend not to require finance and so aren’t directly impacted by rising rates. In fact, PEXA recently reported that last year one quarter of all property sales were to cash buyers.
  • Lack of stock. There are fewer properties for sale right now than at virtually any time I can remember. SQM Research shows Eastern Suburbs property listings are roughly 25% below this time last year. So, even if demand is not as high as it once was, supply has fallen comparatively further.
  • Prices fell further than they should have. Markets aren’t always rational and tend to overreact. There’s a reasonable argument that, given the fundamentals of Sydney’s property market, prices overcorrected in 2022. We’re now seeing prices return to where they should be, given supply and demand.
  • Strong rental market. The rental market is tighter than I can remember, with a citywide vacancy rate of just over 1% (it peaked at 4.3% in June 2020). As a result, we’re seeing rents rapidly head north. Many parts of the Eastern Suburbs are seeing rents rise way faster than average. Rents on Rose Bay houses recorded the biggest jump in the entire city in the year to April (55.6%), while Clovelly houses recorded the fourth largest rise (34.9%), according to Domain. This is encouraging first-home buyers to enter the property market for the first time. It is also bringing investors into the market, looking for yield.
  • Increased migration. During the pandemic, we saw lower-than-usual levels of migration. We’re now making up for this, with as many as 700,000 migrants arriving in Australia before the end of 2024. Historically around 30% of migrants move to Sydney, which could mean as many as 210,000 new residents. Every new arrival will need somewhere to live, putting pressure on both rents and house prices.

Outlook for the remainder of 2023

When combined, the factors above are more than countering any negative sentiment in the market. We expect prices to continue to rise for the remainder of the year – even if we don’t see the same rapid growth in values we experienced over May. Against this is that people will start to come off their fixed-rate loans over 2023, and the RBA may continue to raise interest rates – although this will impact some segments more than others.

As usual, our advice is to always try to move at a time that suits you and your lifestyle rather than attempting to ‘time the market’. After all, the long-term pattern for Sydney property values is that they tend to rise despite any short-term falls.

Want more?

If you’re thinking of buying or selling in Sydney’s eastern suburbs, get in touch