Top end of Sydney property market growing at twice the rate of entry-level homes, data shows

Sydney’s prestige home prices are rising at twice the rate of cheaper properties, new data shows, but even entry level homes are seeing rapid gains.

Prices for the most expensive houses jumped 10.6 per cent over the first three months of the year alone, Domain figures show, increasing twice as fast as the middle of the market and four times as fast as the cost of the most affordable homes.

The figures — which break down home value growth by price percentile — show values at the very top of the market, the 95th percentile, climbed $350,000 in the March quarter to a peak of $3.65 million. They’re now up 20.5 per cent, or $620,000, in the past year.

A house hunter with that budget could afford to buy a median-priced house in the likes of Killara on the upper north shore, Clovelly in the eastern suburbs and Manly on the northern beaches.

Domain senior research analyst Nicola Powell said high-end homes were leading the charge in Sydney’s rapidly rising market, which recorded its steepest house price growth price growth in almost three decades in the March quarter.

“Prices are accelerating faster at the upper end followed by the mid-point of the market,” she said, adding that the strongest quarterly gains had been recorded in the eastern suburbs and northern beaches.

House prices for the mid-market climbed 5 per cent in the March quarter, while the affordable end of the market, the 5th percentile, increased 2.5 per cent.

Annually, mid-priced houses are up 14.1 per cent to a new peak of $1.05 million, while the cheapest houses are up 10 per cent to a record $528,000.

“The top end of the market in any micro-market across Sydney is what is performing best,” said Thomas McGlynn, head of sales at BresicWhitney.

“This is probably representative of the fact of higher socioeconomic classes have come out of COVID with quite remarkable financial returns on investments and business performance.”

Higher-income earners had more scope to increase their budgets, which in turn pushed prices up faster, Mr McGlynn said. Low interest rates and strong demand for larger homes as people work remotely were also fuelling rapid price gains.

Matthew Hayson, director of Cobden & Hayson, said agents were being inundated with buyers who wanted a larger lifestyle home, in short supply in markets such as Balmain and Rozelle.

“We’ve just been involved in five sales this week where [properties] are just making numbers that do not make sense, we’re … nearing $5 million in Balmain for fairly standard terraces, which a year ago would have been lucky to make $3 million,” he said.

Mr Hayson said there was strong demand from professionals, who fared better than expected financially over the past year, and were prepared to spend big — making the most of cheap credit and increased savings, bolstered by less spending on overseas travel and other discretionary expenses.

Mr Hayson expected the Sydney property market could peak this quarter, with fixed-term interest rate hikes by the banks likely to ease demand.

A pullback by some buyers could also ease the strong competition for high-end homes, with Mr Hayson noting some buyers armed with budgets of $5-6 million were finding they could no longer get into the local prestige market and were deciding to “sit this one out”.

Longer term, growth in affordable house prices has been at a closer pace to the top end of town, at 20 per cent and 27 per cent, respectively, over the past five years.

The only suburbs that recorded a median house price below the 5th percentile in the latest Domain House Price Report were Whalan, Box Hill and Airds — all more than 40 kilometres west of the city centre.

It was a different story for the city’s unit market. Sydney’s most affordable apartment price bracket comes in at $385,000 — $5000 cheaper than it was five years ago.

The middle of the market was up about 2 per cent over the five-year period, while high-end apartments were up about 14 per cent to $1,885,000.

The top of the market was the only segment to record annual unit price growth, of just 1.6 per cent, with all other price points down or steady over the year.

While high-end homes had led the market rebound, there had been solid growth at the lower end in recent months, Mr McGlynn said, noting that unit demand was increasing as house prices slipped further out of reach. 

This was echoed by Mr Hayson, who said apartment prices were starting to pull back up, and that more first-home buyers were having to turn to the bank of mum and dad to keep up with rapid price growth.

Source: https://gdevelopments.com.au/