Despite a general slowdown in Sydney's city fringes and waterfront suburbs, a buoyant rental market has helped keep prices high.
The seemingly pandemic-immune Sydney property market has once again reached an incredible milestone moment: more than a quarter of suburbs have a median house price of over $2 million, according to Australian property website domain.com.au. equivalent to $1.44 million).
The port city has seen a phenomenal rise in house prices since the Covid-19 pandemic. In 2021 alone, Sydney dwelling prices will rise by 29.6 per cent, with an average daily gain approaching $1000, according to property data firm CoreLogic.
While Australia's data analysts say current house price growth is waning, rental demand is picking up across Sydney, creating a once-in-a-lifetime opportunity for would-be buyers and investors looking to pick up properties under $2 million.
Industry insiders are advising buyers to look to the city fringes and seaside suburbs to find the next hot market with potential for appreciation. Even so, potential buyers in these areas can't expect prices to rise right away.
According to the April Hedonic Home Index released by CoreLogic, Sydney has the worst house price growth rate among Australia's eight capital cities. Growth in residential prices, which include apartments and houses, contracted to 0.3 per cent in the first quarter of 2022, after reaching a recent peak of 9.3 per cent in the three months to May 2021.
"Sydney, where housing affordability is the least affordable, saw the most dramatic declines," said CoreLogic research director Tim Lawless. "While listing promotions are trending upward, sales activity has slowed throughout the year."
While the pace of rapid house price growth has slowed significantly, there are plenty of signs that Sydney's house prices won't take a nosedive anytime soon. Cameron Kusher, head of economic research at PropTrack, the research arm of realestate.com.au, and author of the PropTrack Rental Report, said a reduction in rental property inventory and a surge in tenant activity had kept rents higher. In this case, investors are bound to follow suit.
"While annual rental growth rates in Sydney and Melbourne have lagged the rest of the country, given that lockdowns have ended, borders have reopened and migrants are returning, these cities are starting to show signs of supply shortages and price increases," he said.
The demand to listing ratio in the PropTrack Rental Report showed Sydney had the biggest year-on-year increase at 52.2 per cent. The indicator measures how many potential tenants browse listings on realestate.com.au across regions.
In most parts of Sydney, buyers with a $2 million budget have struggled to find a desirable high-end property, but there are still some with median house prices below that, according to BuyEast Buyers Agency agent Mark Cadry. A threshold suburban market is worth considering by investors.
"Sydney house prices have risen strongly over the past two years, and we are now turning our attention to suburban areas for the opportunity to discover the next hot market with potential for appreciation," he said.
Cadry sees potential in the Central Coast, a peri-urban area north of Sydney that is popular with wage earners commuting to and from get off work.
He added, “In some suburbs on the Central Coast, like Umina, the average house price is less than $1 million and it’s only an hour and 15 minutes’ drive from central Sydney. It’s very family-friendly. , which combines leisure venues such as cafes and is adjacent to prime beaches such as Patonga Beach and Pearl Beach. As the city expands outward, buyer demand will undoubtedly continue to grow.”
For buyers considering a home in Sydney's periphery, Cadry recommends city fringes and seaside suburbs as destinations.
“If you’re looking to buy a home in the heart of the Sydney metropolitan area, Redfern is the place to be. It’s less than 10 minutes’ drive from the CBD and the median house price is just under $2 million,” he said.
He added, “Bondi Beach is also a great choice. As one of Australia’s most famous beaches, it’s home to celebrities, surfers and the super-rich. While you might not find a home for less than $2 million, But the average house price is still well below that level, so investors are sure to benefit from significant appreciation and strong rental demand.”
Cadry advises savvy buyers to head to areas south of the affluent Eastern Suburbs for potential growth opportunities.
He said: “Hillsdale or Beaconsfield are worth considering, both suburbs are a good distance from the city. I would also recommend Little Bay and Malabar. Malabar, which has always been cheap due to its proximity to Long Bay Prison. Now that the relocation of the prison is on the agenda, it will drive up prices significantly.”
There were 60 suburbs in Greater Sydney with a median house price of more than $1.75 million as of March 1 this year. All of these regions have experienced significant price growth over the past year, but some of these markets saw their quarter-over-quarter rate of change almost stall or even regress in the last quarter. At least 100 homes sold in each suburb during that period.
Veronica Morgan, co-founder of property website suburbhelp.com.au and head of Good Deeds Property Advisors, said buyers should dig deeper into the median house price data. She primarily represents buyers in Sydney's Inner West.
"In the inner west, you're sure to find a home for $2 million or less, but location isn't the only deciding factor, you also need to make sure you're getting a quality property," she said. "Many investors will be proud to Talk about being lucky enough to buy a house below the median price, but that means you can easily come across a property that isn't quite as good, because in reality, 50% of listings sell for more than the median price, in which case , you’re buying a house in the second half.” But Morgan said the data might be more convincing if there were a variety of listing types in a particular suburb.
For example, she said, “If there are two-, three- and four-bedroom homes on the market to choose from, it seems feasible to start with a house below the median price because the data composition comes from a wide variety of homes. rather than a single, homogeneous house.”
“Buyers should strike a balance between location and price,” she said. First, pick a good location that’s not too far from the city, but also close to transport and amenities. Of course, you need to make sure you have a good budget. In short, you You need to find a good quality property in a good location in a desirable suburb, while making sure you can afford it.”
The key to reaping price growth during a market slowdown, says Morgan, is to buy a home in a popular area that others will want to buy, so you can easily find a tenant or flip it on considerable income.
She said: "I sometimes hear investors claim, 'My decisions are all about data', but remember we're talking about residential property. Who's going to live in a house? The answer is people. In my opinion, for those Investors who make home buying decisions based on data alone and completely ignore emotional factors are far more likely to make mistakes than to make the right ones.”