November 2023

Real Estate Round Up #64

This month, the Sydney housing market is characterized by a complex interplay of factors including government policies, economic conditions, migration trends, and changing consumer preferences. This comprehensive report synthesizes insights from multiple sources to provide an in-depth analysis of the current state of the Sydney housing market, focusing on property market trends, rental prices, supply shortages, economic outlook, and government actions.

Housing Supply and Government Targets

The ambitious target set by the Federal Government to construct 1.2 million new homes over five years is a direct response to the dual challenges of a rental crisis and soaring house prices. However, achieving this target is fraught with challenges. The decline in Chinese capital investment, which previously bolstered the Australian housing market, has left a noticeable gap. Additionally, the current high interest rates are deterring new home purchases, further complicating the situation. The construction industry is also grappling with high costs and labor shortages, which slow down the pace of new developments. Moreover, there is a societal resistance to increased urban densities, particularly in suburban areas, which limits the potential for new housing developments. These factors collectively make the government’s housing target appear overly ambitious and potentially unattainable(1). The NSW government’s planning reforms, aiming to add 112,000 new homes, are a step in the right direction but may not be sufficient to meet the growing demand, especially in the context of the current economic and regulatory challenges(12).

Lending for New Homes and Economic Challenges

The significant decline in lending for new homes, remaining at 20-year lows, is a clear indicator of the challenges facing the housing market. The rapid increase in interest rates has led to a decrease in borrowing capacity for potential homeowners, thereby reducing the number of new housing starts anticipated for 2024(2). This trend is concerning as it directly impacts the supply of new housing, which is crucial for addressing the housing affordability crisis. The mixed economic outlook for the Sydney housing market further complicates this scenario. While innovative solutions like granny flats offer a ray of hope in easing the rental crisis by increasing affordable housing options, they may not be sufficient to counterbalance the broader economic challenges, including high interest rates and ongoing supply shortages(5,9).

Migration Impact and Regional Shifts

The impact of the largest migration surge in history on the Sydney housing market cannot be overstated. This surge is reshaping the demand for housing, with a notable increase in interest in regional areas. The shift towards regional areas is driven by a combination of factors, including the search for more affordable housing options and the adoption of flexible working arrangements post-COVID-19. This trend is not only changing the geographic distribution of housing demand but also influencing the types of properties that are in demand. Investors are now more open to exploring opportunities in regional areas, perceiving them as offering better value and potentially higher returns compared to the overheated markets in major cities like Sydney(3,6).

Interest Rate Hikes and Market Cooling

The recent interest rate hikes by the Reserve Bank of Australia are a strategic move to temper the overheated housing market. While these hikes are expected to cool down the market, particularly in Sydney and Melbourne, their full impact is yet to be seen. The higher mortgage repayments and reduced borrowing capacity are likely to slow down the growth in housing values. However, it’s important to note that these measures may not immediately lead to a significant decrease in housing prices due to the ongoing housing supply shortages and high migration levels, which continue to exert upward pressure on home values(4,7).

Rental Market Pressures and Affordability

The rental market in Sydney is under significant pressure, with the cost of renting in many cases surpassing the cost of buying. This trend highlights the rental affordability crisis, especially for lower-income households. The rapidly increasing rents are squeezing out tenants, particularly at the lower end of the market, and exacerbating the issue of housing affordability. The REIA’s urging of tenants to negotiate mutual agreements with property managers reflects the severity of the situation, as vacancies plummet and rental options become increasingly limited. This situation underscores the need for more affordable housing solutions and government interventions to stabilize the rental market(10,11).

Demographic Shifts and Loan Trends

The changing dynamics in property ownership, highlighted by the trend of women overtaking men in solo home loans, reflect broader societal shifts. This trend could be indicative of a variety of factors, including changing gender roles, economic empowerment of women, and evolving family structures. It suggests a shift in the housing market’s demographic profile, which could have long-term implications for housing demand and the types of properties that are sought after. This demographic shift is an important factor for market analysts and policymakers to consider when planning for future housing needs(8).

Potential Solutions and Government Actions

Addressing the challenges in the Sydney housing market requires a multifaceted approach. The NSW government’s planning reforms to add 112,000 new homes are a positive step, but more comprehensive strategies are needed. These could include incentives for developers to build more affordable housing, reforms to streamline the approval process for new developments, and initiatives to stimulate lending for new homes. The REIA’s recommendation for tenants to negotiate mutual agreements with property managers is a practical short-term solution to alleviate some of the pressures in the rental market. However, long-term solutions are needed to ensure a stable and affordable housing market for all residents of Sydney(11,12).


The Sydney housing market is at a critical juncture, facing a range of challenges from supply shortages to economic pressures and demographic shifts. While government targets and policy changes are steps towards addressing the housing crisis, the market’s complexity requires a multifaceted approach that considers economic conditions, consumer behavior, and industry challenges. The success of these initiatives will depend on their effective implementation and the market’s response to evolving economic and social trends.


  1. [Housing Accord Will Be Impossible to Meet – Ray White](
  2. [Lending for New Homes Remains at 20-Year Lows – HIA](
  3. [Investors Increasingly Looking to the Regions – John McGrath](
  4. [Rate Hike Set to Take Heat Out of Housing Market – CoreLogic](
  5. [Could the Humble Backyard Granny Flat Help Ease the Rental Crisis?](
  6. [Biggest Migration Surge in History Impacting the Market – John McGrath](
  7. [Rate Rises Hit Sydney and Melbourne Hardest – HIA](
  8. [Women Overtake Men in Solo Home Loans](
  9. [Top 10 Predictions for 2024 Australian Housing Markets – Ray White Group Chief Economist](
  10. [Rental Data Buying PropTrack House Prices 10-Year Analysis](
  11. [REIA Urges Tenants to Negotiate ‘Mutual Agreements’ as Vacancies Plummet](
  12. [Bold NSW Planning Reforms to Add 112,000 New Homes](