As we step into the New Year, Sydney’s property market is entering a foundational period, as economic and demographic factors align and create a unique window of opportunity for sustainable capital growth, writes Landmark Group director of sales and acquisitions Mark Meyer…
Low inflation and declining interest rates
Forecast interest rate changes is one of the most widely discussed factors shaping the market in 2025. Inflation rates are at their lowest since 2021, placing downward pressure on interest rates.
This shift is expected to stimulate the property market as borrowing becomes more affordable and borrowing capacity increases.
Lower interest rates and reduced inflation are likely to boost consumer confidence and drive increased investment activity in the housing sector.
This gives more investors the capacity to take advantage of the arbitrage opportunities spread across the market.
Population growth and housing supply shortage
Developers and builders are exiting the Sydney market due to rising construction costs, capital pressures and tighter government legislation that places pressure on construction timelines and costs.
Meanwhile, Australia’s population is projected to grow significantly over the next decade, with population increases of circa 550,000 in 2023 and 2024, respectively.
With the highest percentage of Australia’s overseas arrivals landing in NSW (2024), this rapid population growth will continue to put pressure on Sydney’s lagging housing supply and exacerbates the persisting imbalance between supply and demand.
As a result, rental prices and property values are expected to rise.
Widening price gap between houses and apartments
Since Covid, the gap between median Sydney house and apartment prices has reached unprecedented levels.
Accordingly, as affordability remains a critical factor in buyer decision making, more purchasers are seeing value in apartments in areas that prioritise lifestyle, convenience and connectivity.
These trends will likely accelerate apartment demand within urban areas or regions with strong job markets, infrastructure development and cultural or lifestyle attractions.
Changing preferences and work-from-home trends
As lifestyles continue to evolve and hybrid working becomes more commonly accepted, the demand for larger two-bedroom and three-bedroom apartments with dedicated study areas has grown rapidly.
With remote work becoming a permanent fixture, families and professionals are seeking functional living spaces that accommodate work-from-home setups while remaining within their budgets.
The property growth cycle
Given these factors, the Sydney market should see property price growth over the short to medium term. As Sydney’s supply shortfall persists and the price gap between apartments and houses widens, apartments designed for modern lifestyle needs are among the key asset classes to look out for over the next few years. In addition, monitoring government policies on housing and infrastructure will also provide valuable insights into emerging growth areas.
About the author
Mark Myer (pictured top) has more than 30 years of experience in real estate.
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