Sydney property market swells with upward trends
Sydney’s property market has untethered itself from the downward trend with sales and yields up, and units looking strong as immigration and international students keep listings tight.
The buzzword around Sydney dwelling values, based on a trend emerging over the last three months is recovery, with experts predicting rental yields in particular are well positioned for stronger growth.
Sydney leads the housing value upturn nationwide, increasing 1.3 per cent in April and is leading the positive turn in housing conditions with dwelling values rising each month since February, according to CoreLogic Home Value Index (May 1).
Grant Ashby, Director, Sydney Cove Property
Prestige property agent Sydney Cove Property director Grant Ashby says the city micro market has been doing quite well and remained resilient throughout Covid.
“The investor market was in a really bad way through Covid and wasn’t performing, and now that the rents are back above the pre-Covid level and the returns are starting to come in their favour, even though there’s interest rates and other things, we’re starting to see a bit more activity.”
Sydney under the hammer
CoreLogic’s Auction Market preview (week ending May 7) reflects activity across greater Sydney too, stating 687 dwellings are scheduled to go under the hammer this week, up 20.5 per cent from the 570 auctions held last week and 4.2 per cent above the 659 held in the same week last year.
At 68 per cent, last week's clearance rate was 2.9 percentage points higher compared to the previous week (65.1 per cent) and 9.8 percentage points higher than the results reported this time last year (58.2 per cent).
The increase in last week’s clearance rate saw both Sydney’s withdrawal rate decrease to 13.9 per cent and the portion of properties passed in at auction fall to 18.1 per cent.
Median house value across the Sydney markets
CoreLogic research measures the harbour city’s current median house value at $1,253,759 million, up 1.3 per cent in April, 3.2 per cent for the quarter, 1.9 per cent for the year to date.
Suburbs showing the highest 12-month value growth include Fairfield ($918,021), Sydney Inner City ($1.082,282), Auburn ($773,021), Strathfield/Burwood/Ashfield ($864,792), St Marys ($800,449), Ku-ring-gai ($2,633,824), Camden ($985,215), Mount Druitt ($716,311), Campbelltown ($770,157) and Rouse Hill-McGraths Hill ($1,476,095).
The Ray White Groups auction report (April 30-May 6), saw an East Killara property set a street record of $4.4 million and an Erskineville property sell $116,000 over reserve at $1.4 million, while a Smithfield ($1.1 million) property attracted the highest number of active bidders (19).
Alex Pattaro chief auctioneer Ray White NSW said buyers did not seem to be deterred by the past week’s interest rate rise.
“We are seeing higher than average open home attendees resulting in a strong average bidder number and the market conditions make it a great time to sell and sellers should have no fear coming to the market.”
The East Killara property was being sold by an older couple downsizing and bought by a young family upsizing while Shaun Stoker, property lead agent Ray White, said almost all the bidders on the Erskineville property were builders.
“The highest bidder was an investor who saw it for the first time on Thursday night and is going to do it up and rent it out as it’s in a really good location right next to Erskineville village, which has received a lot of demand since Erskineville was voted one of the best suburbs in New South Wales, plus the property had a lot of potential to add value.”
Sydney’s Inner West precinct
The Inner West of Sydney is a fast growth area where apartment prices are less than half the level of houses in the same suburbs, along with strong job growth and the boost of major infrastructure spending, says property research firm Hotspotting.
Annandale, Ashfield, Balmain, Camperdown, Leichhardt, Marrickville, Newtown, Petersham and St Peters benefit from the WestConnex and Sydney Metro West transport projects, the Royal Prince Alfred Hospital’s teaching hospital and medical precinct, a state government back redevelopment of Lilyfield and Rozelle into an innovation hub known as Bays West.
High unit values and rising rents
Sydney’s median unit price is the highest of all other capital cities at $787,427, followed by Canberra, $603,696 and Melbourne, $590,473, growing 1.2 per cent in April, 0.3 per cent for the February to April quarter on the back of a surge of overseas migrants and international students coupled with a shortfall in rental listings (CoreLogic Property Pulse Report May 3).
“The last boom we received in Sydney was purely around student migration and I’ve heard from a student visa approver recently, there’s another 7,500 students coming into Sydney in July, so that’s going to increase more volume of people again and there’s a call from business who can’t get workers so we can expect more migrants coming on so I think if you’re an investor, I think you’ve got to look at where your current rents are and you’ve got to forecast a year on year growth on rents, and I think if you did a five year projection on that I think you’ll be surprised where the numbers will sit,” Mr Ashby said.
Tim Lawless, Executive Research Director - Asia Pacific, CoreLogic
Sydney’s gross yields trail all other states and territory capitals including Darwin where gross yield on units is 7.5 per cent, however CoreLogic’s report shows Sydney’s unit rents increased 5.8% for the rolling quarter and 19.1% for the year to April meaning the stronger rental growth through April keeps Sydney in second position behind Canberra as the most expensive capital to rent in, with median rents per week for dwellings at $711 per week, houses at $756 and units, $663.
“In early 2022, unit rents were around $70 a week cheaper than house rents, however, with unit rents rising much faster than house rents, that gap has narrowed to just $20 a week in April due to a couple of factors playing out, such as a lack of new unit supply,” Tim Lawless head of research CoreLogic Asia Pacific said.
“There is also the additional rental demand from overseas migration, especially students, which tends to be more pronounced in inner city areas as well as precincts close to universities and transport hubs that are typically associated with higher density styles of rental accommodation,” he said.
Mr Ashby said high end listings are tight in the inner city but in terms of investor stock there’s a lot more for sale being sold on quiet type listing.
“There’s a bit more of that going on and I think that’s a result of a lot of the investors being a bit on the older of the ledger and looking to exit while they can but generally, we look at a database of people who are locally known to us and who are the main drivers for our sales.
“We are starting to see some of the old investors coming back to the market because they can see future growth with rents. A few investors have been quiet for a big period of time, and they’re floating back to the market.”
