This week saw the release of two well respected property research pieces – the 2024 Boom and Bust Report from SQM Research and the 2024 Knight Frank Horizon Report.
Louis Christopher, the managing director of SQM research has a base scenario for property prices in Sydney to move -4% to 0%, as rate rises finally hit home and immigration slows.
He believes free standing houses in Sydney’s middle to outer rings will record the bigger corrections whilst Sydney’s inner ring is still expected to record price rises as top end property remains in demand.
He proposes that Sydney apartments will significantly outperform.
The Horizon Report also proposes outperforming apartment prices for Sydney and indeed across the country.
A perfect storm of materials supply chain disruptions, spiking labour costs and increased cost of debt have put the brakes on new apartment launches. To add complexity several large builders have collapsed, reducing confidence and increasing the need for diligence and subsequently the time it takes to get a project to complete.
This is all against a backdrop of existing undersupply, and demand from strong immigration.
It is expected only 1,960 new apartments will complete across greater Sydney in 2023, approximately 85% lower than completions back at the height of the last apartment boom in 2017. From now until 2025 Sydney is on track to complete a meagre 11,700 apartments, again against a backdrop of a 1.5% rental vacancy rate and predicted rent rises of 7% to 10%.
Developers of completing and new apartments in 2023 have been listing their properties at higher prices to offset the raft of increased costs, and whilst days on market have increased for these properties the stock has been absorbed, increasingly to purchasers who aren’t reliant on credit such as downsizers and foreign buyers.
From now until 2025 Knight Frank forecasts mainstream new apartment prices to rise 5% a year, mainstream and luxury older apartment to rise at 4% a year and luxury/premium new apartments to increase by 6% a year.
The predicted trend for apartment prices will be received with mixed feelings by the growing number of home buyers who have been priced out of a Torrens title home and will now have to contend with a warmer apartment market.
Despite any trend the property adage will always ring true; ‘land appreciates, buildings depreciate’.
Apartment buyers must be vigilant about location, build quality, and the standard of neighbours/residents to ensure the best capital growth and future value of a purchase.
That’s all for this week. As always, if you have any questions please get in touch.
