The Sydney housing market is navigating a complex period, with new trends shaping the way homes are built, sold, and purchased. While some relief in the supply of labour and materials is expected to boost home construction over the next two years, the growth will largely come from detached houses, as the development of apartments and townhouses slows.
Rising Distress in Property Sales
An increasing number of Sydney homeowners are opting to sell due to financial pressure, according to warnings from the Reserve Bank of Australia. Despite higher property prices providing a buffer for some, those unable to manage mounting mortgage repayments are being forced to list their homes. The National Australia Bank recently revealed that loan arrears have hit their highest levels since 2020, highlighting the strain on borrowers from persistently high interest rates.
This trend has contributed to a surge in listings for Sydney’s spring selling season, with properties on the market exceeding the averages of the past five years by over 12%. However, even as distressed sales climb, buyers remain cautious, further complicating the dynamics of supply and demand.
Affordability Hits Record Lows
Affordability continues to be a pressing issue for aspiring homeowners. It now takes the average household over a decade to save for a 20% deposit, while median mortgage repayments consume more than half of the typical household income. Renting isn’t much easier—median rents take up 33% of household income, both figures significantly exceeding their 20-year averages.
The latest ANZ-CoreLogic Housing Affordability report paints a stark picture: an average-income earner of $100,000 can only afford 10% of Australian homes, the lowest proportion ever recorded. This marks a sharp decline from December 2020, when 50% of homes were within reach for middle-income earners.
Interest Rate Pressures Persist
Adding to the affordability challenge is the Reserve Bank’s stance on interest rates. The central bank has indicated it is unlikely to lower rates before mid-2024 unless there is an unexpected downturn in employment. For now, borrowers will continue to grapple with the financial burden of elevated rates, leaving little relief on the horizon for potential buyers.
What Lies Ahead?
Sydney’s housing market remains a challenging environment for buyers and sellers alike. While the easing of construction constraints offers some hope for increased housing supply, the broader affordability crisis and high interest rates cast a long shadow. For those navigating this market, understanding these shifts is key to making informed decisions.
Whether you’re planning to build, buy, or sell, staying informed and seeking expert advice can help you adapt to the ever-changing landscape of Sydney’s property market.