July 2023

Real Estate Round Up #60

This month the Sydney housing market has seen a significant shift in buyer sentiment, moving from the Fear Of Missing Out (FOMO) to the Fear Of Making a Mistake (FOMM). This shift is attributed to the anxiety over further possible interest rate hikes, contradictory price predictions, and a lack of supply, which has left both buyers and sellers paralysed. This paralysis is particularly evident among inexperienced buyers and vendors, who are finding it hard to make that momentous decision about their homes. The more experienced buyers, however, are still active in the market, demonstrating resilience in the face of uncertainty. This shift in sentiment is a clear indication of the market’s volatility and the need for potential buyers and sellers to be well-informed and cautious in their decisions(11).

The market has also seen a decrease in new home sales, with a 4.8% drop in June, leaving sales for the 2022/23 financial year down by 33.2% compared to the previous year. This decline is attributed to the rise in the cash rate over the past year, which has significantly impacted the volume of new home sales. The rise in the cash rate has led to a significant decline in the volume of new homes sales, which will result in the least number of new homes commencing construction for more than a decade in 2024. This trend is concerning, as it indicates a potential slowdown in the housing market, which could have broader implications for the economy(9).

Rental Prices and Supply Shortages

Rental prices have been on the rise, with the Reserve Bank of Australia (RBA) and CoreLogic reporting a peak in high rents and interest rates. This increase has been attributed to the lack of housing supply and the return of overseas workers and students to Australia in record numbers. The high rents and interest rates are putting pressure on renters, particularly those on low incomes, and could potentially lead to an increase in rental stress and housing insecurity. This trend underscores the need for measures to increase the supply of affordable rental housing and to provide support for those struggling with high rents(7).

The shortage of housing supply has been further exacerbated by the cash rate, which has impeded housing supply. The rise in the cash rate has led to a significant decline in new home sales, resulting in fewer projects being commenced and a rapid shrinkage in the volume of work under construction from late this year. This lack of new work entering the pipeline will result in fewer projects being commenced, and the volume of work under construction shrinking rapidly from late this year. This will occur at the same time that Australia has a pre-existing shortage of housing, and overseas workers and students return to Australia in record numbers. This shortage of housing supply is a major issue that needs to be addressed to ensure the affordability and availability of housing(9).

Economic Outlook

The economic outlook for the Sydney housing market is uncertain, with the potential for more interest rate hikes and inflation causing anxiety among buyers and sellers. Despite these cost pressures, the number of distressed property sales is falling across Australia. In Sydney, only 3.6% of listings were a result of financial pressures in June 2023, compared to the December 2022 high of 5.2%. This decrease in distressed property sales is surprising given the rising interest rates and inflation, and suggests that property owners may be finding ways to manage their financial pressures. However, this trend needs to be monitored closely, as continued economic pressures could lead to an increase in distressed sales in the future(10).

Government Actions and Potential Solutions

The government has been urged to stop increasing the cost of new homes through taxes and regulatory imposts. The more homes are taxed, directly or indirectly, the fewer homes will be built, which could exacerbate the housing shortage. This call for government action highlights the role that policy can play in influencing housing market outcomes. By reducing taxes and regulatory imposts on new homes, the government could stimulate the construction of new homes and help to alleviate the housing shortage(9).

One potential solution to the housing crisis is a shift from stamp duty to a broad-based land tax. This shift could help first home buyers and address the issue of younger generations struggling to get onto the property ladder. This solution would require significant policy reform, but could have a positive impact on housing affordability and accessibility. However, it would also need to be carefully implemented to ensure that it does not unfairly burden certain groups or lead to unintended consequences(8).


In conclusion, the Sydney housing market is currently facing a variety of challenges, including a shift in buyer sentiment, a decrease in new home sales, and a rise in rental prices. These challenges are further exacerbated by the lack of housing supply and the potential for more interest rate hikes. However, potential solutions such as a shift from stamp duty to a broad-based land tax could help address these issues. These trends and issues highlight the complexity of the housing market and the need for careful analysis and policy intervention. As the market continues to evolve, it will be important to monitor these trends and to continue to explore and implement effective solutions to the challenges facing the Sydney housing market.


  1. [This is the year of the apartment: Ray White](https://www.therealestateconversation.com.au/news/2023/07/10/this-the-year-the-apartment-ray-white/1688957043)
  2. [The graph that shows stressed property owners may be starting to crack](https://www.smh.com.au/property/news/the-graph-that-shows-stressed-property-owners-may-be-starting-to-crack-20230710-p5dn6z.html)
  3. [NIMBYism in Sydney is leading to racist outcomes](https://theconversation.com/nimbyism-in-sydney-is-leading-to-racist-outcomes-207204)
  4. [Why Western Sydney is feeling the heat from climate change more than the rest of the city](https://theconversation.com/why-western-sydney-is-feeling-the-heat-from-climate-change-more-than-the-rest-of-the-city-201477)
  5. [Is it cheaper to buy a house at auction or make an offer before?](https://www.domain.com.au/news/is-it-cheaper-to-buy-a-house-at-auction-or-make-an-offer-before-1224332/)
  6. [Combined clearance rate reduces for three weeks in a row but remains above 70](https://www.corelogic.com.au/news-research/news/2023/combined-clearance-rate-reduces-for-three-weeks-in-a-row-but-remains-above-70)
  7. [High rents, interest rates peak: RBA, CoreLogic](https://www.abc.net.au/news/2023-07-19/high-rents-interest-rates-peak-rba-corelogic-inflation/102618924)
  8. [Bank of Mum and Dad, be warned if your kids haven’t bought a home by 30](https://www.domain.com.au/news/bank-of-mum-and-dad-be-warned-if-your-kids-havent-bought-a-home-by-30-2-1225034/)
  9. [Cash rate continues to impede housing supply: HIA](https://www.therealestateconversation.com.au/news/2023/07/20/cash-rate-continues-impede-housing-supply-hia/1689817073)
  10. [Distressed property sales are falling across Australia, despite cost pressures](https://www.domain.com.au/news/distressed-property-sales-are-falling-across-australia-despite-cost-pressures-1225732/)
  11. [Housing market FOMO has been replaced by FOMM – the Fear of Making a Mistake](https://www.domain.com.au/news/property-fomo-has-been-replaced-by-the-fomm-the-fear-of-making-a-mistake-1225037/)