Sydney property has been seeing prices steadily increase in value over the past 12 months and there could be more upside ahead for homeowners according to a new report.
A report from Oxford Economics predicts that Sydney property prices could increase as much as 23 per cent over the next three years as ongoing demand from immigration and a severe supply shortage are set to continue putting upward pressure on both house and unit values.
Sydney house prices are predicted to jump 15.8% over the three-year period while units are expected to see even more growth rising 23% over the same period as reduced borrowing capacity and ongoing affordability issues push many buyers into cheaper housing options.
However, in the short term, Sydney property price growth might be more subdued, despite seeing values up over 10% in the past 12 months.
Oxford Economics Australia said the pace of growth is slowing as a result of the additional interest rate increase in November and rising total listing volumes, so this year would be softer in terms of price growth.
As a result, they are expecting to see Sydney house prices increase just 2.7 per cent in the 2024 financial year before rising 6.3 per cent each year in 2025 and 2026.
Oxford Economics said given the tight supply in the market, any interest rate cuts this year or next year will lead to an influx of demand and drive the next acceleration of price growth from late 2024 onwards.
Oxford Economics Australia expects 2024 will see house price growth of only 3.3% and 5.2% for units in the 2024 financial year.
The more affordable level of unit prices compared to houses, is likely to help drive more growth in the short term.
Overall, Sydney’s median house price is predicted to increase 5.9% per annum over the two years to June 2026, while median unit prices are expected to surge 8.3% per year over the same period of time.
Nationally, Oxford Economics said the country’s median house price hit a new record of $939,000 last December but that it expects growth to slow this year, in response to falling auction clearance rates which have dropped into the low 60s before seeing a rebound in early February.
Oxford Economics said that there has been a divergence in the performance of capital city markets in recent times and notably the level of listings in the market has been rising.
However, with higher borrowing costs, many would-be buyers are still not able to buy, or willing to buy at current levels, and are waiting for lower interest rates to help them enter the market.
In the short term, the higher listing levels will reduce the upward pressure on prices.
Despite listings rising, there is still a real shortage of quality stock in blue-chip suburbs. This has been a trend we’ve seen over the past two or three years and this is keeping upward pressure on prices in certain locations and suburbs.