Sydney housing market insights

While Australia's property prices reached record highs during the peak of the Covid-19 pandemic, Sydney, being our most expensive city, led the way.

Although prices have cooled slightly since then, the Sydney property market continues to command impressive prices, especially in highly sought-after areas. Some suburbs in the city are so tightly held that properties for sale are a rare occurrence, with homeowners holding onto their houses for up to 20 years.

Lifestyle and coastal suburbs remain in strong demand as homebuyers eagerly await the opportunity to secure their dream properties.

According to CoreLogic data, Sydney dwelling prices have experienced a 1.8% increase over the past month. However, when looking at the last 12 months, there has been an 8.2% decline. Nevertheless, since the start of the pandemic in March 2020, dwelling prices in Sydney have still risen by an impressive 22.8%, as reported by PropTrack.

It's important to note that the Sydney housing market is not a singular entity. Transactions are still taking place, and market sentiment varies across different segments. Buyers are pushing up prices for well-located A-grade homes and family-friendly apartments, which are in short supply. However, B-grade properties are taking longer to sell, and informed buyers are avoiding C-grade properties.

This flight to quality suggests that the various sectors of the Sydney real estate market will become more segmented, creating a more "normal" property market scenario.

The strength and depth of the Sydney property market are further exemplified by strong auction clearance rates. Auction clearance trends serve as timely indicators of market sentiment and can provide insight into future property prices.

Over the past 30 years, Sydney property values have grown by a staggering 449%. House values have increased by 507% to reach $1.34 million, while unit values have grown by 340.1% to $806,310, as per CoreLogic data.

Although the housing market experienced a slight downturn during the pandemic, Sydney has led the recovery among Australian cities. Interestingly, the apartment market has performed better than houses, and the record price gap is narrowing as house prices have fallen at a faster rate since their respective peaks.

Affordability constraints, recent interest rate hikes, and reduced borrowing capacity have influenced buyer demand, particularly towards units. This presents a window of opportunity for homebuyers and long-term property investors.

While discretionary buyers and sellers may have temporarily stepped back from the market, life in the NSW capital continues. People will still get married, divorced, start families, and need to move homes. As interest rates stabilise and inflation is brought under control, these individuals will reenter the market with renewed vigour.

Additionally, the opening of international borders in early 2022 has positioned Sydney as a major recipient of new residents, including skilled immigrants and overseas students. This influx places additional pressure on the Sydney property market, especially in the rental sector.

In terms of property performance, well-located, family-friendly apartments in inner suburbs are expected to remain strong due to increasing demand from owner-occupiers, particularly first home buyers, and investors. On the other hand, apartments in generic high-rise towers may continue to face challenges.

Looking ahead, real estate in larger regional locations around Sydney, such as Byron Bay, the Central Coast, the Hunter Valley, Wollongong, and the NSW south coast, is anticipated to perform strongly. Beachside suburbs are likely to outperform the wider market.

More investors are recognising that bargains are scarce in the Sydney market. However, they also understand that properties purchased today will likely be considered bargains in the future.

Remember, knowledge is power. Stay informed about the market trends, seek expert advice , and be proactive in your search for your dream home.

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