Record Price Gap Between Sydney Homes and Apartments
Sydney’s house prices are now double that of units, growing four times faster during the past year, new analysis shows.
The record price gap follows a surge in Sydney house prices, which rose 33.1 per cent last year, adding nearly $1100 each day, or $400,000 in 12 months, according to Domain’s quarterly House Price Report.
While the city’s unit prices lifted by 8.3 per cent year-on-year to hit a new record high of $802,255, the figure is just half the median of $1.6 million now needed to secure a Sydney house.
“This divergence has created a record price gap [and] the rapid escalation in price is proving a significant financial barrier to entry for buyers and upgraders against a backdrop of low wage growth,” Domain chief of research Nicola Powell said.
“Because of this, housing affordability will continue to weigh on demand throughout 2022.”
Powell said all capitals posted healthy yearly gains as a result of ultra-low interest rates, government stimulus, cash savings from cancelled overseas holidays or entertainment, and demand for bigger homes to spend more time in.
Perth and Darwin were the only capitals that failed to reach new record prices.
Brisbane house prices climbed 25.7 per cent, or $163,000, during the year; Melbourne rose by $172,000, a gain of 18.6 per cent; and Adelaide prices increased by $158,000, a 27.5 per cent jump on the same period.
Hobart added $194,000 or 34.6 per cent, Darwin was up $150,000 or 30.1 per cent and Perth by $43,000 or 7.5 per cent. Nationally, house prices rose by $215,000—a 25.2 per cent increase.
Median house prices
| Capital City | Dec 20 | Dec 21 | QoQ | YoY |
|---|---|---|---|---|
| Sydney | $1,202,804 | $1,601,467 | 6.0%▲ | 33.1%▲ |
| Melbourne | $929,090 | $1,101,612 | 5.8%▲ | 18.6%▲ |
| Brisbane | $629,884 | $731,547 | 10.7%▲ | 25.7%▲ |
| Adelaide | $573,952 | $731,547 | 8.6%▲ | 27.5%▲ |
| Canberra | $862,340 | $1,178,364 | 11.3%▲ | 36.6%▲ |
| Perth | $569,883 | $612,348 | 1.8%▲ | 7.5%▲ |
| Hobart | $558,732 | $752,110 | 8.7%▲ | 34.6%▲ |
| Darwin | $496,883 | $645,487 | 0.0%▶ | 30.1%▲ |
^Source: Domain
However, the markets started to diverge sharply in the last three months of last year as soaring prices and a flood of listings dampened growth in Australia’s two largest cities.
The smaller and cheaper capital cities have now powered ahead, driven by the tailwinds of affordability and demographic shifts.
By contrast, Sydney added just 6 per cent and Melbourne gained 5.8 per cent, while Canberra lifted by 11.3 per cent and Brisbane by 10.7 per cent.
Darwin, the weakest among the capital cities, recorded no new growth over the quarter while Perth, where borders remained closed, lifted by 1.8 per cent for the same period.
“Demand continues to outstrip supply across a majority of the cities, however, rapid price growth and affordability issues are likely to shift demand in 2022,” Powell said.
“Price growth has slowed from earlier in 2021 but it is higher than last quarter.”
Nationally, house prices experienced a rate of growth at 6.5 per cent across the recent quarter, with median house prices topping $1 million to set a new record.
National median unit prices also reached a new high with quarterly price growth at 1.9 per cent.
Economists are now predicting that rising mortgage rates, further macro-prudential intervention, affordability constraints, a pick up in new housing supply and an increase in property listings will cool the market this year, before a moderate downturn in 2023.
Median unit prices
| Capital City | Dec 20 | Dec 21 | QoQ | YoY |
|---|---|---|---|---|
| Sydney | $740,662 | $802,225 | 0.9%▲ | 8.3%▲ |
| Melbourne | $560,008 | $593,387 | 3.9%▲ | 6.0%▲ |
| Brisbane | $401,808 | $416,003 | 2.0%▲ | 3.5%▲ |
| Adelaide | $341,155 | $380,349 | 4.5%▲ | 11.5%▲ |
| Canberra | $506,662 | $555,644 | -1.6%▼ | 9.7%▲ |
| Perth | $350,729 | $380,353 | 2.0%▲ | 8.4%▲ |
| Hobart | N/A | N/A | N/A | N/A |
| Darwin | $326,159 | $326,159 | 1.8%▲ | 11.7%▲ |
^Source: Domain
AMP Capital chief economist Shane Oliver said he expected house prices to rise 5 per cent in 2022, before falling by up to 10 per cent in 2023.
“As we went through the lockdowns and disruptions last year people really focused on the ‘family home’ and reimagined what they really wanted and needed from property to ensure it had a lifestyle focus,” Oliver told The Urban Developer.
“While trends such as slower unit growth and a push for the regions is expected to continue, the bulk of it has not passed, and we are moving into an environment of reopening which could mean two steps forward and one step back for those in the market needing to reallocate some of their spending back to services.
“The fall in house prices in Melbourne in December could be a sign of things to come and for that reason I believe house prices will be tempered this year.”
Tim Lawless, Corelogic’s national research director, said the only broad regions avoiding a slowdown in the pace of growth in housing values were Brisbane, Adelaide and regional Queensland.
“These markets are benefitting from a healthier level of affordability compared with the largest capitals along with a positive demographic trend and consistently low advertised stock levels,” Lawless said.
“We could see our two biggest capital city markets Sydney and Melbourne hit their peak later this year although the timing is highly uncertain and depends on a broad range of influences.
“Although we can’t see any evidence that specific housing markets have peaked, it is clear that most markets have moved through a peak rate of growth.”
