Leanne Pilkington presents her 2024 predictions for NSW property

The newly appointed head of the national real estate institute shared that with supply challenges certain to persist over the next year, fiscal policy changes will be the factor with the biggest influence on how property prices perform.

“Interest rates will continue to be the dominant factor influencing the real estate market in 2024,” the CEO said, noting that while the Reserve Bank of Australia (RBA) is not expected to make waves in 2024, the cash rate could certainly see some adjustment.

“Interestingly, on the basis of the most recent data, some are pricing in two rate cuts in the second half of 2024, although there are concerns around unemployment and the inflationary impact of the coming tax cuts,” Ms Pilkington noted.

And while governments are drilling down on their promise to deliver more dwellings to the market, Ms Pilkington commented that the effects of those policies will take more time than 12 months to be felt.

“A major boost in supply has the potential to improve affordability but the delivery of more homes is not a short-term proposition, so the market is likely to remain highly sensitive to interest rate movements going forward,” she remarked.

Apart from a decline in investor activity that was witnessed across the state, Ms Pilkington noted that market performance across NSW is not expected to have one prevailing narrative, with local factors holding sway across Australia’s most populous state.

Sydney’s east remains steady

“The eastern suburbs market marches to the beat of its own drum. We’re seeing a two-speed market in some areas with the defining line being whether a buyer needs finance or not,” Ms Pilkington stated.

According to the CEO, prices for homes in the $5 million price point have seen some tapering as upgrading families who predominantly dominate this segment are moderating their choices in the face of rising interest rates. At $10 million and above, however, prices are steady and transactions are occurring at a relatively strong rate.

Ms Pilkington believes that the next noteworthy movement in prices of eastern suburbs real estate is likely to be upward once interest rates begin trending back down again.

Transit is another strong factor playing into prices in the east. Ms Pilkington reported that Laing+Simmons agents are seeing increased buyer interest in properties within close proximity to train stations in response to housing supply announcements which carry a potential increase in floor space ratio allowance.

Wait and see in the west

In a market that sees a higher number of mortgagee sales than others, much of the west’s 2024 performance depends on interest rates and homeowners’ ability to make their mortgage payments.

“There was some pain towards the end of 2023 with the rise in the cost of living having an impact and a raft of mortgagee sales occurring in some areas of the west, particularly in higher density areas,” Ms Pilkington noted.

The year also gave rise to an increase in landlord valuations, which the network head stressed is often a precursor to an uptick in investor sales.

“There’s also been an increase in the number of vendors selling properties purchased in self-managed super funds, as owners can’t simply put their hands in their pockets to cover the cost of increased repayments,” she explained.

“Often the requirements of the super fund mean that these properties need to be positively geared. However, despite rents increasing, in many cases these increases are not keeping up with increases in mortgage repayments.”

Depending on how these factors play out in the month ahead, the west could be a rare market to see a substantial shift in dynamics in 2024.

“An increase in listings in select western suburbs markets in 2024 may result in a change to the supply and demand dynamic, and as the year progresses we could potentially see conditions swing towards becoming more of a buyers’ market,” Ms Pilkington noted.

How high-density development proposals from the government play out on a local level will also determine submarket performance.

“Government announcements of rezonings for higher densities may appeal to owners of property near transport nodes, however there remains a disconnect with developers and the feasibility of new projects. A meaningful increase in supply is a long-term prospect at best.

“In the outer west, such as suburbs like Riverstone and Quakers Hill, these announcements contrast previous changes related to flood plains and allowable development. Many previously planned projects in these parts will simply no longer be built, keeping a lid on supply.

“In the short term, we see 2024 kicking off with a continuation of an active transaction market in the more affordable western suburbs, as the large buyer pool has not tapered off,” Ms Pilkington said.

The north sees extremes

“Few markets experienced a pandemic fluctuation to the extent of the Northern Beaches,” Ms Pilkington commented.

“From the peak of the COVID boom, values in markets like Narrabeen and Collaroy declined significantly only to begin to recover in the second half of 2023 at a comparatively sharper rate than the rest of Sydney.

Ms Pilkington noted that the investor exodus is particularly apparent in the Northern Beaches. Increased holding costs are forcing many investors to sell and the people buying these properties are predominantly owner-occupiers, including first home buyers.

“Such is the strong demand for homes from owner-occupiers, in some circumstances agents are advising vendors to forget the styling and simply get the open home scheduled,” she said.

The network has seen as many as 40 bidders register for some auctions in the north, illustrating how much demand is outweighing supply.

“As such, unlike most other markets, we’re seeing some property flipping take place, and while the full recovery from the high of the pandemic is yet to be realised, the start of 2024 is set to be characterised by continued price growth.”

The south gets set to start strong

The market in the city’s southern suburbs is expected to begin the new year, as 2023 ended, energetically.

“The surge in listings which typically corresponds with the start of spring was delayed in some markets, as more campaigns kicked off during November and December. The start of 2024 is set to be busy,” Ms Pilkington explained.

Overall, stock levels in the south are tight and while the buyer pool is large, people are cautiously sticking to their budgets. Well-presented, turnkey properties are doing particularly well in this area as high building costs make renovations a challenge.

“The market is therefore price sensitive and vendors typically require motivation to sell. We’re not seeing opportunistic capital growth-driven sales at the moment,” Ms Pilkington commented.

Regional recovery underway

After price falls in 2022 and a slower recovery seen in many Sydney markets, the regions have now largely recovered and a steady start to the year is expected.

“The top end is generally performing well and people with established work-from-home schedules living further afield are investigating seachange and treechange opportunities, adding to already strong local enquiry levels,” the exec reported.

Though the buyer exodus from Sydney, Canberra and even Melbourne has tapered off somewhat from the prime pandemic years, a steady flow of metro movers remains evident.

But Ms Pilkington reported that the burden of stamp duty is having a pronounced effect on prices outside of the state’s major city.

“The $800,000 exemption threshold is discouraging some first home buyers from competing for properties beyond this limit, despite what their budget would otherwise allow, and as such vendors of properties in the $800,000 to $900,000 bracket need to work closely with agents to come up with the most appropriate asking price,” she advised.

By and large, mum-and-dad investors are the most likely to sell in these smaller markets as investment properties proved too costly to maintain.

“The pain of interest rate rises has been acutely felt by mum-and-dad investors in particular, and investor sales characterise many regional markets at present, contributing to the extremely tight rental vacancy rates.

“As investors exit the market, owner-occupiers are picking up the slack. Given the high cost of building, the market for established housing remains strong.”