The past couple of years have been good ones for the Darling Point property market.
Domain data shows that the median three-bedroom apartment in our suburb value grew 62.2% over 2020 and 2021, while the median two-bedroom apartment value grew 26.1%. But with interest rates at their highest level in a decade and cost of living pressures rising, can we expect the same growth to continue in 2023?
Here are my five trend forecasts for the coming 12 months.
1. The top of the market to overperform
While many of the banks are predicting double digit price drops across Sydney for 2023, the property market is made up of many sub-markets that don’t always follow the major trends.
Right across Sydney, prestige property has been the best-performing market segment over the past couple of years. Even as the broader Sydney property market declined by more than -10% in 2022, we were still seeing street and building records being set here in Darling Point.
While rising interest rates may have dampened enthusiasm across most of the property market, prestige buyers usually aren’t as impacted because they tend to buy cash. So demand for premium homes stayed strong throughout the year – both from local and overseas-based buyers. At the same time, very few top-end properties came to market, which meant demand was much higher than supply. This continued to push prices upwards throughout the year.
Given these same dynamics continue today, I don’t see the situation changing any time soon. As the suburb with the third most expensive median house price in the country supported by the recent sale of 3 Lindsay Avenue, Darling Point selling for approximately $60,000,000 expect our prestige market to stay strong right throughout 2023.
2. More stock to hit the market as the year progresses
Lack of stock wasn’t just an issue in the prestige market. Right across the board, fewer properties came to market over 2022 than any year I can remember. This is supported by listings data compiled by SQM Research, which shows there were just 54 properties listed for sale in Darling Point in October 2022 – 26% fewer than the previous year (and interestingly roughly half the number on offer a decade ago).
We never saw the traditional Spring rush of properties coming to market last year. Instead, a lot of people seemed to be sitting on the sidelines, waiting for the market to turn. We expect them to come out when the RBA stops raising interest rates (something likely to happen over 2023). At the same time, we expect buyer confidence to slowly return so that demand also rises to meet this increased supply.
The result should hopefully be growing property values – although I don’t expect to see the same runaway growth of 2020 and 2021. CoreLogic has predicted that the property market will bottom out in the first quarter of 2023, before a “swift recovery”.
3. Downsizers to drive the market
For some time, downsizers have been perhaps the single most important buyer segment in Darling Point – and for good reason. This isn’t just one of Sydney’s most beautiful suburbs, it’s also one of the most convenient – well-serviced by public transport and within walking distance to almost everything you’d ever need, including the Sydney Harbour foreshore, great parks, excellent cafes and restaurants, amazing views and more.
As more people reach a time in their lives when it makes sense to let go of the large backyard, I anticipate downsizers will be an equally dominant factor in our local property market over 2023. Any property with downsizer appeal – and that means single-level, private, well-located and spacious – is likely to outperform the market. This is reflected in the 30.6% growth that we saw in Darling Point’s three bedroom apartment market over the 12 months to December 2022.
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4. Families to also be a factor
It won’t just be about downsizers in 2023, however. Increasingly, we’re seeing families with children buying into the Darling Point apartment market.
These families tend to fall into one of two categories. The first is couples who often bought into the suburb (or started renting) pre-children and are now looking to upsize without leaving the area. The second is often more established families who have given up the traditional home in the suburbs for the convenience of Darling Point life. These buyers tend to have children in the later stages of high school, and it also makes sense to move closer to their education.
Just like many downsizers, family buyers tend to favour larger three-bedroom – or even four-bedroom apartments. For this reason, I also expect growth in this part of the market to exceed the average this year. And this huge demand for larger apartments is helping drive the trend for apartment amalgamations.
5. Investors and first home buyers to drive prices upwards
Finally, I’ve noticed that the two groups that have been quietest over the past 12 months have been first home buyers and investors. These are the buyers who often feel the effects of interest rates most acutely and are, therefore, most likely to have been holding off as the RBA engaged in eight consecutive rate rises.
When interest rates do stabilise, I think we’ll see both buyer groups come back into the market.
The main reason for this is that rents have been growing so rapidly – especially over the second half of 2022. In fact, between July and December last year, the median rent in our suburb rose from $882 to $1,352, according to SQM Research – a rise of 53% in less than six months. Yields are sitting around 2.5%.
For investors, higher rents make for an attractive income source. For tenants, they tend to tip the scales in favour of entering the market and buying a home. As a result, I think we’ll also see both groups start to re-enter the market, which could mean growth in the entry-level market for apartments too. We already saw growth of 32.6% on one bedroom units in Darling Point over 2022.
In short, 2023 should be another strong year for our local property market despite today’s wider trend of declining prices and rising interest rates.
If you’d like to know more about the Darling Point property market or if you need help buying or selling a home, get in touch.