As we look back on the past three years, it’s been a pretty wild ride for the property market.
Could that be the new norm?
The Sydney property market has been in a state of uncertainty since the COVID-19 pandemic hit in early 2020, so it’s safe to say it’s been an interesting ride.
The market went through a brief slump in the mid-2020’s, followed by a surge of gains, followed by a rapid fall, which was followed by a quick rebound. However, as we approach mid-2023, the market seems to be turning around again.
In this article, we explore the market events during the past couple of years and compare them to previous market cycles to see whether they are normal or not.
During the outbreak of COVID
In the year before the pandemic, it’s hard to remember what life was like. If you think back to the end of 2019 and 2020, you’ll recall how booming the property market was then. Sydney’s median house value rose 5.7% in the final quarter of 2019. The median price went up 13.1% in a year by March 2020, after gaining again in January and February 2020.
When COVID hit, sales fell -2.0%, with the median value dropping -2.0%
The boom of 2020-to-2021
Even though many economists predicted house prices would fall by up to 20%, what followed was a rapid increase. The median house price in Sydney increased 4.8% in the December 2020 quarter, followed by another 33.1% in 2021. Over the same period, the median apartment value rose 8.3%, giving the total median dwelling value a 25.2% increase.
A study by Domain revealed that the speed at which prices rose during this boom was entirely unprecedented. According to its research, a typical boom lasts 33 months. The median value of Sydney property had risen 27.7% in 16 months by January 2022, when the median price stopped increasing. Therefore, prices rose at a rate approximately twice as fast as during a normal boom.
As a point of comparison, national property prices rose 76.4% between 2000 and 2004 during the most recent market boom, which was followed by another boom between 1995 and 2000, when the national median dwelling value rose 44.1%.
2022’s falling market
After the boom of 2020 and 2021, came the bust. Even before the RBA began lifting interesting rates in May 2022, Sydney’s median home value had started slipping. However, the raising of rates seemed to accelerate the slide, so that in the 11 months between February 2022 and January 2023, Sydney’s median dwelling value had fallen -13.5%, according to CoreLogic.
Unlike most declining markets, this one lasted longer and was sharper, as Domain data shows the average downturn lasts nine months and prices decline by -3%.
The Sydney median house value dropped 36% during the 1890s depression. It’s possible there have been longer downturns, like between 2017 and 2019, when Sydney’s median house value fell almost -14 percent in two years. However, the recent boom has had the fastest falls in recent history.
2023: rising values and rising interest rates
Now, we seem to be entering a new market phase, with Sydney’s median value again on the rise – even in the face of rising interest rates. Sydney’s median value is now 3.0% up since the bottom of the market in January 2023, with house prices rising 3.2% and apartment values 2.3%.
A really cool thing about this trend is that it isn’t just happening at a time when interest rates are rising, but also at a time when wages aren’t going up. In December 2022, the consumer price index went up 7.8%, while wages went up 3.3%, so the average person spent less.
In the meantime, the official cash rate went from 0.1% to 3.85% since May.
When the RBA raised interest rates last, the official cash rate went from 3.0% to 4.75% between April 2009 and November 2010. There wasn’t a lot of inflation when people’s money was shrinking like it is now, because wages were growing by around 4.0% a year and inflation was around 2.0%.
Despite rising interest rates, Sydney’s median house value rose 12.7% over 2010.
Sydney’s property market: ups and downs
As a result of a growing population and limited supply of housing, the long-term trend in Sydney’s market is to rise. The recent falls, however, have happened at a much faster pace than usual
Whether you are buying or selling a property in Sydney’s eastern suburbs, we would love to hear from you.