From top to bottom, Sydney continues to soar

The Sydney property market has continued its price surge, undeterred by New South Wales' lengthening lockdown and any associated impact on employment and income. 

The market is still being led by the top end of town and regional lifestyle centres, but tightening vacancy rates are also presenting investor potential to western Sydney buyers.

CoreLogic data showed the median value for all dwellings in Sydney increased 15 per cent in the year June 30, eclipsing the previous high price point recorded in July 2017.

Sydney’s prestige, or prime, property market has taken the crown as the world’s leading city in luxury homes, with prices expected to rise 10 per cent over the coming year according to the Knight Frank Prime Global Forecast 2021/2022, released this week.

Closed borders have seen wealthy Australians purchase at home instead of abroad, with returning expats fuelling demand for the limited number of listings. 

There were 1,429 prime sales recorded in the first quarter of this year, making it the highest quarterly figure on record for Sydney. Prime sales are defined as the top 5 per cent of the market.

A case in point is an exclusive Mosman home with a $10 million price tag and views of Balmoral, which has had 72 enquiries, with 18 groups taken through and three contracts taken.

The Agency chief executive Matt Lahood, said the best performing suburbs have been premium blue chip suburbs, as well as regional markets and suburbs within 10 kilometres of the CBD.  

“In the next 12 months, I expect all these areas to continue to perform but the suburbs I expect to perform very well are the lifestyle suburbs — areas like Bowral and the Southern Highlands, Central Coast and Wollongong that are a bit further from city areas but have a lifestyle that many buyers are looking for,” Mr Lahood told API Magazine. 

“In the unit market, investors should be looking at apartments close to the CBD, transport and amenities.” 

Herron Todd White’s latest Residential Month in Review revealed that houses have continued to show the strongest growth with an increase of 11.2 per cent during April, compared to 4.6 per cent for units. 

The top quartile of the market has seen the strongest quarterly growth, with an 11.4 per cent increase, compared to a five per cent increase in the bottom quartile, while the middle part of the market experienced a seven per cent increase, according to CoreLogic data. 

It assessed that the main reasons for the strong growth in the market have been the continuing historically low interest rates along with increasing confidence in the economy post-COVID seeing demand continue to strengthen. At the same time, supply has not kept pace, with new listings and total listings for Sydney down on the equivalent period in 2020. 

A rental vacancy rate of just 2.8 per cent is also luring investors drawn to higher rental yields.

“There is an expectation that vendors are more likely to list given the strong market conditions being experienced and that this should start to even out the current demand and supply imbalance, which is likely to lead to a moderating of growth as the rest of 2021 plays out,” Herron Todd White property valuer Vaughan Bell said.

While the prestige market is attracting headlines for its multimillion-dollar sales, Sydney’s outer suburbs are also generating plenty of activity.

Prices have increased rapidly in a short period of time in southwestern suburbs, such as Prairiewood and Austral, and southern Sydney areas, like standout performers Earlwood and Monterey, and development sites (duplex or detached dual occupancy) across the St George region. 

“Agents report strong interest from first homeowners, investors and downsizers, with houses selling within hours, buyers camping out for land and properties going to auction so hotly contested that reserves have not been a barrier to the final selling price,” Mr Bell said. 

“A perfect storm had been created and we attribute this to low interest rates, broader affordability in the south-west, housing grants, cashed up buyers and confidence gained from the multiple infrastructure projects occurring in and around this part of Sydney.”

Modern homes in sought after western Sydney suburbs also continue to achieve strong results “with records breaking what seems like every week,” Mr Bell said.

“This can be attributed to a number of factors, including the new wave of working from home buyers, who are now looking further west for more bang for their buck, with dedicated workspaces, landscaped yards and room for a pool.”

Western suburbs specialist, property consultant David Lipman of real estate agency Morton, said infrastructure projects meant Penrith was worthy of inclusion on the investor’s radar.

“The increase in prices relates to record low interest rates, COVID restrictions leading to higher savings levels, a land grab boom with investors targeting R3-zoned land, increased house and land package releases, migration to the west based on affordability compared to Sydney prices, and jobs growth from infrastructure development to local and toll roads and Nepean hospital, and proximity to the second airport,” he said.

Apartments have failed to keep up with houses in terms of capital growth across much of Sydney, but according to Mr Lipman, despite having more supply and fewer buyers than the house market, Penrith is benefiting from buyers who are being pushed out of reach of rising house prices. 

“Penrith one-bed units next to the train station and shopping complex are getting 5.0 per cent gross returns, two-beds at 4.7, and the vacancy is very low.”

“We are seeing upward pressure on rental prices due to buyers comprising 70 per cent owner occupiers (first home or downsizers), that has led to less properties being put on the rental market, leading to perfect conditions for investors. 

“The house market particularly is seeing high rental growth due to 90 per cent of buyers being owner occupiers.”

House rents across Greater Sydney are holding at a record high, but rents in a string of suburbs are still more than $100 a week cheaper than they were five years ago.

Inner-city Millers Point and Ultimo, and Clovelly in the eastern suburbs, are among 11 suburbs where the median weekly asking rent has dropped more than 10 per cent below what it was back in 2016, according to the latest Domain Rent Report.

Mr Lahood of The Agency said lockdowns hadn't impacted buyer sentiment or demand at all. 

“What the pandemic and lockdowns have shown us that is people’s homes are the most critical thing for people — ensuring they have a home as a place to live and work in the area they want to be in is the biggest driver in most people’s financial goals," Mr Lahood said.