Weekly News
- Sydney House Prices Expected to Surge 15% in the Next Two Years, Escalating Home Purchase Costs.
- The New South Wales Summer Cruise Season Kicks Off, Welcoming Over Three Hundred Cruise Ships to Dock in NSW.
- Surging Housing Demand Ahead! Australia’s Population Projected to Grow by a Staggering 7.4 Million in the Next 20 Years Due to Immigration.
Sydney House Prices Expected to Surge 15% in the Next Two Years, Escalating Home Purchase Costs
Sydney’s real estate market is characterized by wild fluctuations, and it’s anticipated to surge once more in the coming two years.
Close to 90 areas are predicted to see a median house price surpassing $3 million, a number on par with those below $1 million. This analysis is based on PropTrack price data and recent forecasts from KPMG, estimating a nearly 15% and 13% rise in house and apartment prices in Sydney over the next two years, respectively.
KPMG forecasts that the major surge in prices will occur towards the end of 2024 and the beginning of 2025. In the 2023/24 fiscal year, house prices are projected to increase by 4.7%, followed by a 10.3% growth in 2024/25. Apartment prices in 2023/24 are expected to rise by 4.3%, with an 8.6% increase in the 2024/25 fiscal year.
KPMG’s research indicates that, despite a record number of households being unable to afford housing, these price increases may persist, primarily due to a complex web of domestic and international forces. These include loose lending policies, housing shortages, rising construction costs, renewed foreign investment in the real estate market, and population growth.
These staggering predictions have prompted economists to issue a warning: Sydney is on the brink of becoming a market where only high-income buyers can afford houses, leaving others with apartments as their only viable option. According to the forecasts, the median house price in Sydney will reach $1.53 million by 2025, and at current interest rates, only those with annual incomes exceeding $290,000 can afford it.
According to data from the Australian Bureau of Statistics, only around 15% of Sydney households have annual incomes exceeding $300,000. KPMG economist Brendan Rynne says this stratification is common in high-cost real estate markets, with the wealthy residing in houses and average earners in apartments. He cites cities like London, New York, and Paris as examples.
Those purchasing an apartment with a median price of $850,000 in 2025 would require an annual income of at least $160,000 to avoid “mortgage stress,” a threshold achieved or exceeded by roughly one-third of households.
Although wages are on the rise, it’s expected that the rate of wage growth in the next two years will not come close to matching the pace of rising home prices. Economist Nerida Conisbee states that for ordinary income earners in areas like the Eastern Suburbs, North Shore, Northern Beaches, and Inner West, buying a house is practically impossible. She predicts this trend will extend to more areas, with the northwest possibly being the next to follow suit.
State governments are being urged to raise the eligibility requirements for first-time homebuyer assistance programs, as the current criteria make it nearly impossible to qualify given the current property prices. Presently, first-time homebuyer grant applicants must purchase house and land packages valued at less than $750,000 or new apartment units priced below $600,000.
Buyers hoping to be exempt from the entire stamp duty need to acquire homes valued below $800,000, with discounts available for purchases below $1 million.
According to KPMG’s forecasting model, by mid-2025, there won’t be any areas with an average house price below $750,000. As home prices continue to rise, more people will be pushed to the outskirts of the city. Furthermore, many renters are trying to escape leasing by becoming first-time homebuyers. While interest rates are climbing, so are rental rates, making the prospect of purchasing one’s own home more appealing.
Rouse Hill
The New South Wales Summer Cruise Season Kicks Off, Welcoming Over Three Hundred Cruise Ships to Dock in NSW.
New South Wales’ 2023/24 summer cruise season is now in full swing, poised to be Australia’s largest, injecting billions into the state’s economy. International Cruise Association data reveals that cruises contributed $2.5 billion to NSW’s economy in 2022-23, supporting 9,000 jobs. This season, 331 cruise ships are expected to visit, marking a 16% increase from the previous summer and including a record 12 maiden calls. The NSW government’s support for the industry extends to Newcastle, fostering job creation and bolstering tourism. In southern NSW, 41 cruise ships will grace Eden, bringing an $18 million economic boost.
Surging Housing Demand Ahead! Australia’s Population Projected to Grow by a Staggering 7.4 Million in the Next 20 Years Due to Immigration.
The Australian Financial Review reports that data analyzed by .id, a subsidiary of PEXA, indicates that the national population is expected to surge by 7.4 million in the next 20 years. The four states projected to experience the most significant surge in housing demand are set to be Victoria, expected to add 2 million residents by 2041, followed by New South Wales with 1.7 million, Queensland with 1.6 million, and Western Australia with 904,000, primarily driven by strong net migration.
Tim Lawless, Director of Research at CoreLogic, suggests that these states’ housing markets will benefit from robust population growth, which will support price increases. Population growth represents rental or purchasing demand, as all these people need a place to live. As a result, this will fundamentally drive property prices up, unless there’s a significant supply response.
Australia’s population is estimated to increase by 2 million by 2026, reaching 27.7 million. By 2036, it is projected to grow to 31.3 million, and by 2046, it’s expected to surge to 35 million, equating to an annual increase of approximately 420,000 people.
Ivan Motley, founder of .id, a wholly-owned subsidiary of PEXA, emphasizes that population growth is a primary driver of housing supply. Where there’s a place to live, people will go. Currently, there are issues of housing shortages and affordability, which calls for an increase in supply to address the problem. At present, we’re not constructing enough housing to maintain stable vacancy rates and average household sizes.
In Sydney, the southwestern suburbs, Blacktown, Parramatta, and the inner city are expected to witness the most robust population growth in the next 20 years. It’s projected that 572,000 people will move to these areas, necessitating an additional 267,000 dwellings.
Simultaneously, the report anticipates new housing supply in Riverstone, Penrith, Leppington, Campbelltown, Gilead, Parramatta, and Sydney City during the same period.
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