Sydney’s property market is entering a period of mild softness, but the downturn is expected to be relatively short-lived.
While recent months have seen a slight loss of momentum, with home values falling 0.1 per cent in October marking the first monthly decline in nearly two years, experts suggest Sydney’s market remains solid because of the strong fundamentals. For buyers, this brief dip might actually be a good opportunity before the recovery begins. Partnering with a buyers agency Sydney can help individuals navigate this market effectively and seize opportunities during this period.
While prices are softening, buyers shouldn’t be expecting to see any steep discounts. Increased listings which are 12 per cent above the five-year average in Sydney, have put downward pressure on prices, but a persistent undersupply of newly built homes is likely to prevent a prolonged or steep decline.
Sydney’s housing downturn is expected to follow the “V-shaped” recovery often seen in previous cycles according to CoreLogic. During the 2022-23 downturn when interest rates started to rise, home values fell 12.4 per cent over 12 months before rebounding to new highs within 15 months. Experts predict a similar trajectory this time, with the market poised to stabilise as soon as interest rates begin to fall.
Rate cuts could stop any declines
Interest rate movements remain a key factor in Sydney’s housing outlook for the next 12 months. While the Reserve Bank of Australia (RBA) is expected to cut rates, the timing remains uncertain, with most forecasts pointing to mid-2025. However, some economists suggest rate cuts could arrive as early as February, potentially reigniting buyer demand.
The size of the rate cuts will also determine the extent of any market recovery. Smaller cuts may have a limited impact on affordability and price growth. But at this stage, it appears unlikely that there would be any large rate cuts without an economic downturn.
Strong fundamentals
Despite the current weakness, Sydney’s market is unlikely to face any real instability. The city’s chronic undersupply of homes remains a big factor supporting long-term prices. Population growth, coupled with constrained construction activity, has created a big gap between supply and demand that continues to hold up the market.
While affordability challenges remain a concern, Sydney’s blue-chip areas are expected to maintain their appeal. Buyers prioritising established locations in blue chip areas with good amenities and strong transport links are likely to remain competitive, even in a softer market. That’s why buyers agents in Sydney like to focus on blue ship locations, because of their steady growth over time.
Opportunities for buyers
For those looking to enter the market, this slower period presents a good opportunity. While sharp price falls are unlikely, the slight decline in values combined with reduced competition might just give buyers better negotiating power.
Properties in blue chip locations with limited supply are expected to recover quickly, making this a great time for long-term investors and owner-occupiers to get themselves set.
However, buyers should remain cautious, as the window of opportunity may close quickly if interest rates are cut earlier than expected. With the market historically bouncing back strongly from downturns, the sooner you get into the market the better positioned you will be.
If you want to learn more or are considering buying property, seeking advice from a buyers agency in Sydney who provide local expertise through qualified Sydney buyers agents.
