Sydney’s property market is losing momentum

Sydney’s and Melbourne’s pandemic property boom is losing momentum as the gap widens between vendor expectations and what buyers are willing to pay. There has been a noticeable shift on the ground, with fewer buyers at inspections and auctions every week thanks to an influx of new listings added to the market.

SQM Research’s Christopher’s Housing Boom and Bust Report 2022 shows a total of 5431 auctions are set to hit the market this week the largest ever recorded in the country.

SQM Research data has indicated that the biggest price shrinkages would be felt in the Sydney and Melbourne property markets. Brisbane is forecast to dominate dwelling value growth in 2022 and is tipped to increase by 8% to 14%.

Sydney house prices are forecast to fall by 12% in 2023, as the Reserve Bank of Australia takes the cash rate to 1.25%, according to the Commonwealth Bank of Australia’s (CBA) latest analysis. Nationally, dwelling prices are expected to drop by 10% as higher interest rates put downward pressure on demand, wrote CBA’s head of Australian economics, Gareth Aird.

CBA has increased fixed mortgage rates for the third time in six weeks, as banks try to recoup higher funding costs and doubts grow that the Reserve Bank will keep rates on hold until 2024. CBA on Friday increased fixed home loan rates by up to 0.30 of a percentage point, in the latest effort by the nation’s largest home lender to overcome a squeeze on loan profits.

The strong increase of property prices in Sydney and Melbourne are likely to slow from the strong gains made over the past 12 months. Property experts are predicting that prices will rise another 5 to 6% during 2022 and will drop in the second half of next year, most likely as a result of further intervention by the Australian Prudential Regulation Authority (APRA) banking regulator, which could happen as soon as this month! It is also expected that the serviceability buffer rate will go from 3% to 3.5%.