John McGrath – Sydney leads the national market recovery
Sydney is leading the national property market rebound, with home values resuming their long term growth pattern following a relatively short and sharp market correction.
As discussed in this year’s McGrath Report, Sydney returned to growth earlier than expected given interest rates were still rising at the time. A lack of stock led to a swift and continuous rebound in prices over several months, with auction clearance rates reaching above 70%.
Clearance rates at the start of Spring remained at this level but are moderating now at about 65% – which is still strong – due to more homes being for sale.
A surge in migration, particularly from China, has certainly added demand to Sydney’s market this year. Migrants tend to rent first but with Sydney’s vacancy rate so low, it is likely new arrivals are fast-tracking their first home purchases.
Desirable inner and middle ring suburbs are seeing the fastest price growth as buyers seek to upgrade in premium neighbourhoods.
The fastest price recovery is being seen in Sydney’s prestige market, with a weaker Australian dollar encouraging expats and foreign buyers to compete for the best prestige homes in harbour and beach areas. A Sydney eastern beaches record was set in May 2023 with a $45 million sale in Tamarama.
The rural outskirts have become Sydney’s new trophy home zone, with large prestige estates commanding extraordinary prices as more of the city’s business elite purchase impressive sprawling acreages in areas like Camden, Middle Dural and Kenthurst.
These buyers no longer need daily proximity to their corporate CBD offices, and the opening of the Western Sydney International Airport in 2026 will be highly convenient for frequent business travellers.
The desire for prestige acreage is also being seen in premium regional areas of NSW like the Southern Highlands and the Byron Bay hinterland.
Over the past 20 years, more prestige homes have been built in desirable seachange and treechange areas and this is attracting more buyers today. The record $37 million sale of a 47ha estate near Byron Bay in April 2023 exemplifies this trend.
Migration from Sydney to the regions is continuing, albeit on a smaller scale than during the pandemic, and this has contributed to an overall softer regional market correction.
Premium regional beach hubs experienced the strongest pandemic gains and the highest falls during the correction. This means there is a lot of new value in the most popular regions today, whilst the strongest capital growth is now occurring in more affordable rural and treechange areas of the state.
The biggest silver lining of a market downturn is the opportunity to buy high quality property for the long term, in the best locations, at a discount. That time is now. Sydney is re-entering a period of normal market conditions where 2% to 5% growth per year is a reasonable expectation.
Meantime in the ACT, the property market is showing resilience with a new growth cycle commencing in May. Renovated homes in the central established suburbs are commanding premium prices, while more affordable newly-built homes in the outer suburbs are attracting younger buyers.
View the McGrath Report to see my top Sydney suburb picks for 2024.