City Beat: Sydney unit market insights for February
After annualised -10 per cent declines, it seems the Sydney unit market has possibly bottomed out.
Property data firm CoreLogic found that, despite two consecutive monthly declines of over one per cent, the Sydney unit market posted surprising gains over February.
Corelogic's Home Value Index showed the unit market in the harbour capital grew 0.3 per cent growth, the first gains since February 2022.
Over the last 12 months Sydney's median apartment value has dropped from $831,000 to $769,00.
CoreLogic's national index declined -0.14 per cent over February, the smallest monthly fall since May 2022 (-0.13 per cent), when rate hikes commenced.
CoreLogic’s research director, Tim Lawless, said the stabilisation in housing values over the month coincides with consistently low advertised supply levels and a rise in auction clearance rates.
“The past four weeks have seen the flow of new capital city listings tracking -17 per cent lower than a year ago and -11.9 per cent below the previous five-year average,” Lawless said.
“This trend towards a below average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline.”
Lawless however suggested the recent stronger results don't necessarily indicate the market has bottomed.
“Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived,” Lawless said.
“We also have the fixed-rate cliff ahead of us; arguably the full impact of the aggressive rate hiking cycle is yet to play out.”
Mark Bernberg, Managing Director of Ray White Projects Western Sydney, says he believes a new reality is dawning.
"I think buyers are well, well versed that 0.1 per cent were emergency interest rates, based on a once in a lifetime pandemic," Bernberg says.
"It's still well below the long term average, and having an interest rate with a three, or potential four, in front of it, is a new reality, and one that people are adjusting to.
"Humans are resilient, and human resilience is creating a new reality. Now they've got over the shock of rate rises, and now there's less of a fear of how far they can go, their expectation has been realigned, and now they're just trying to find value within their new borrowing power."
Property advisory firm Charter Keck Cramer's recently released H2 2022 report noted that, for a second year in a row, Sydney has built fewer apartments than Melbourne, which Bernberg believes will create an apartment boom.
"Simply put, demand is still massively outstripping supply, even in a correcting market, and clearly it will continue to do so as building approvals decline and apartment completion forecasts don't stack up to the surge in population we are set to experience," Bernberg added.
Charter Keck Cramer's report says there continues to be a growing mismatch between several supply and demand side metrics which is leading to a substantial shortage of supply of apartments in Sydney over the next few years.
"The NSW Department of Planning & Environment significantly reduced population projections in 2022 anticipating average growth of 60,000 persons per annum, down from circa 92,500 persons per annum pre-COVID in 2019.
"Based on the reduced population projections, implied dwelling demand will average circa 28,500 dwellings per annum of which apartments will need to (and have historically) comprised the majority of new dwelling supply.
"With only 17,000 forecast apartment completions in 2023, 11,400 completions in 2024 and 2,800 completions in 2025, the imbalance between demand and supply continues to grow."
