The Urban Developer’s Sydney housing market insights for February reveals that despite volatility across 2020, Sydney’s residential market has remained resilient.
This resource, updated monthly, will collate and examine the economic levers pushing and pulling Sydney’s housing market.
Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.
So, what were the highlights across Sydney’s property market throughout January 2021?
In Sydney, property values fell 2.9 per cent between April and September 2020 but have since rebounded with prices at year’s end lifting by 3.73 per cent, with houses up 4.95 per cent and units 0.9 per cent, year on year.
House prices retreated to 0.4 per cent over the first month of the new year to reach a median value of $871,749 with houses down 0.7 per cent and units holding steady at 0.1 per cent.
The median house price in Sydney now exceeding $1 million according to Corelogic and $1.2 million according to Domain, a lift of by $55,000 or 4.8 per cent over the last three months.
However, the median unit price in Sydney remains $20,000 lower than before the onset of the pandemic last March.
^Source: Corelogic Hedonic Home Value Index - January
|City||Household income to meet mortgage repayments September 2019||Household income to meet mortgage repayments September 2020|
^Source: Moody's Investor Services - October
|City||Global ranking||3-month change||12-month change|
^Source: Knight Frank Prestige Property Index - November
Auction clearance rates have rebounded after falling to a 15-year low following a six-week ban on public auctions at the onset of the pandemic.
Following the season shutdown auction activity has ramped up with 82.9 per cent of listings across Sydney clearing in the final week of January.
Across 272 auctions, 170 were sold at a median price of $1.23 million, with 23 passed in and 12 withdrawn.
In the same week last year, Sydney saw a 72.9 per cent success rate across 158 auctions.
Agents have also noted an imbalance of more buyers than sellers which fixer-uppers and knockdowns seeing high demand, particularly properties ripe for redevelopment.
According to data from SQM Research, the number of residential listings on the market fell by 3.4 per cent in January compared to the previous month, as buyers snapped up the first available homes of the year.
|Week||Clearance rate||Total Auctions|
|Week ending 10 January 2021||N/A||N/A|
|Week ending 17 January 2021||N/A||N/A|
|Week ending 24 January 2021||N/A||N/A|
|Week ending 31 January 2021||82.9%||272|
^Source: Corelogic Auction Clearance Rates - January
Sydney unit markets, where weak demand and high supply has driven a sharp drop in rents, remains significantly impacted by stalled overseas migration, especially from lower overseas student numbers.
According to Domain, apartment rents are currently sitting at 2013 levels, with the median asking rent for Greater Sydney units falling $25, or 5.1 per cent, over the December quarter to $470 a week.
Apartment rents fell by 5.6 per cent in Sydney over the past year, with inner-city areas generally harder hit.
The largest rental value declines where seen in the CBD and South Sydney region, where rental values were down 4.1 per cent over the last quarter.
|City||Jan 2021 Vacancy Rate||Monthly % change||Jan 2021 total vacancies|
^Source: SQM Research - January
^Source: SQM Research - January
|Type||Rent||Monthly % change||Annual % change|
^Source: SQM Research - January
Closed international borders from early 2020 have further weighed on developers’ appetite to build apartments as demand from foreign students virtually disappeared and is unlikely to reappear until late 2021 or early 2022 at the earliest.
Despite this, New South Wales recorded its highest private house approval figure across December since March 2000.
Dwelling approvals rose by 1.8 per cent while approvals for private sector houses surged by 16.2 per cent.
Investor lending surged over January, lifting for an eighth consecutive month, with new loan commitments for owner occupier housing lifting by 6.5 per cent over the month of December to be $6.45 billion.
The ongoing health crisis saw NSW lose the most residents of any state to interstate migration over the September quarter, with a net loss of 4,100 people–an extension of a long standing trend.
^Australian Bureau of Statistics - December (Suspension of trend series between May 2020 and Jul 2020 due to Covid-19)
|Dwelling||Approved||Monthly % change|
^Source: Australian Bureau of Statistics; Reference period December (Next Release 02/03/2021)
|Region||First home buyer loan commitments||First home buyer ratio - dwellings||First home buyer ratio - housing|
^Source: Australian Bureau of Statistics - December (Next Release 01/03/2021)
|Region||September (quarter) 2020 arrivals||September (quarter) 2020 departures||June 2020 net|
^Source: Australian Bureau of Statistics - September 2020 quarter
The HomeBuilder scheme will continue until the end of March in a bid to prevent a major decline in construction activity.
Read more: Home Builder Gains Eleventh Hour Extension
Recommendations to change the Review of Infrastructure Contributions will aim to improve infrastructure while enabling more efficient development and support housing affordability.
The central bank, which introduced a package of measures at its latest meeting, cut the cash rate target to 0.1 per cent—the lowest in Australia’s history, in its bid to support a recovery.
Westpac economists have forecast Sydney house prices are set to surge 14 per cent between 2021 and 2023 while analysts at the Reserve Bank have also projected house prices growth, plotting an increase by 30 per cent over the next three years—if low interest rates prevail.
NAB group chief economist Alan Oster has forecast a 7 per cent lift in Sydney’s housing prices over 2021 while ANZ economists are projecting an 8.8 per cent surge.
Senior Research Analyst
“The level of distressed sales has remained low throughout the pandemic, but I do think there are still future risks present for certain geographical locations, particularly within the CBD areas in Sydney.
“I think the greatest areas of concern are units and apartments in those CBD areas that are most reliant on overseas migration and foreign students, which have experienced higher vacancy rates and where rental prices have deteriorated rapidly.
“If an investor is struggling to attract a tenant there is only so long they can support that property with no rental income … so, as we see more properties come off mortgage holidays, we could well see more investors having to offload properties.”
“The change between metro and regional housing demand in NSW has been more substantial than in other states.
“Internal migration data shows more people are leaving Sydney for regional areas, resulting in a transition of activity from the metro regions to the outer fringe and regional markets.
“This demographic trend is further compounded by the demand shock of stalled overseas migration.
“Sydney historically receives the vast majority of overseas migrants, these metro areas have been the hardest hit by this demand shock.”
“[Across 2021] I expect Sydney to experience gains of about 2 per cent, on average across the whole city.
“But within that, units in inner-city areas will probably go down 0-5 per cent, whereas outer suburbs houses will probably go up 5 to 7 per cent.
“I think employees’ and businesses’ attitudes to working from home have changed fundamentally as a result of this pandemic, which will change people’s attitudes towards commuting and lifestyle and ultimately where they choose to live.
“As a result, I’d expect regional areas within—a two-hour zone of Sydney—could be up towards 10 per cent next year.”