Sydney Housing Market Insights: August 2022


The Urban Developer’s latest Sydney housing market insights reveals the city’s property values declined by a staggering -2.2 per cent in the month of July—the single biggest monthly loss since January 1990.

This resource, updated periodically, 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.

Sydney median property prices % change


^Source: Corelogic - July 2022

Following record-breaking price growth, in which house prices rose 30 per cent last year—adding nearly $1000 each day or a total of $360,000 in 2021, prices have continued to contract at pace retreating by -3.5 per cent in the last three months.

The Corelogic home value index declined -1.3 per cent nationally in July—a third consecutive month of declines nationally, as Sydney eased back by -2.2 per cent—its sixth consecutive month of declines.

Sydney’s rate of decline is occurring at its fastest in 40 years, as higher interest rates deflate demand and trigger a sharp fall in profit-making sales as buyers pull back.

Sydney housing prices had already started falling before the first cash rate increase, while Canberra recorded a fall in prices in May and Brisbane in July.

Values are down -5.9 per cent from their January peak, deeper than the 3.9 per cent drop at the start of the GFC in 2008 and occurring at a much faster rate of decline than in the 2017-2019 downturn. 

During the 2017-2019 downturn, Sydney prices took 22 months to drop from peak to trough, and another 22 months to post a nominal recovery.

Sydney prices slipped into negative territory on February 19 for the first time since October 2020.

Sydney’s house prices are now falling five times faster than units. Over the recent quarter, house prices across Sydney dropped by -2.7 per cent, their first quarterly decline in two years and the sharpest fall since early 2019. During the same period, unit values slipped by -0.6 per cent.

The rolling 28-day change in the Corelogic daily index revealed that a typical house in Sydney is now valued at $1.34 million after a loss of $36,000. The median unit price is now $806,000 after similarly retreating by $15,000 over the 30 day period.

The gross yield for both houses and units edged up over the month by 0.1 per cent to now be 2.5 per cent and 3.5 per cent respectively.

Despite the delines, the gap between the median house and unit value in Sydney remaines at more than $540,000, retreating slightly from an all-time high of $560,000.

Sydney house prices could now plunge as much as -20 per cent by the end of next year, according to ANZ economists, with a -14 per cent loss expected by the end of this year before a further -6 per cent next year.

ANZ is predicting the bulk of the price decline would be over by the third quarter of next year, and will be followed by a period of stabilisation, before rising in 2024.

Importantly, Sydney house prices have more than doubled in the past decade, rising 146.4 per cent in the 10 years to October 2021.

House prices in Sydney’s most expensive suburbs, which last calendar year surged by more than 25 per cent, have only slipped by around -0.2 per cent, or around $8000, in the 12 months to end-July.

Sydney’s housing market: policy updates and trends

Buying power not cost pressure to hit housing

The decline in housing prices is not due to rising distress for borrowers but rather reflects lower borrowing power.

Over the next 18 months, when a borrower seeks a loan, they will be assessed at a higher interest rate than before, and with higher living costs. That translates to the maximum amount they can borrow being lower and means house prices will fall back as people have less to spend.

House price growth three times faster than wages

The price of a typical house in Sydney has multiplied by 17 times in the past 40 years, almost three times faster than wages.

The median house price in Sydney in 1981 was $78,900, five times the national full-time average annual earnings of $15,800. In 2021, the city’s median house price was $1.31 million, 14 times the average income.

Home rental listings slump to record low

Residential rental listings nationwide have dropped over the past four weeks to a record low, as more landlords opt to turn their investment properties to short-term leasing market

The shrinking pool of available rental properties and rising demand from international students and returning workers have fuelled a sharp drop in vacancies across the central business districts.

What the experts are saying about Sydney’s housing market

Tim Lawless

Head of Research

“Historically more expensive housing markets tend to lead the upswing, but also lead the downturn.  

“If we get the same pattern as last time, falling housing prices will spread from expensive suburbs in Melbourne and Sydney across the country.

“In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years.”

Shane Oliver
Chief Economist
AMP Capital

“We’ll probably see the worst of the price declines later this year or early next year, and for values to bottom out around the September quarter next year.

“So price falls would be deeper, but we may get to the bottom faster. I was originally thinking the top-to-bottom falls would drag out into 2024, but it now looks like it could be as short as 12 months.”

Nicola Powell
Chief of Research and Economics

“We’re just at the beginning of the downturn, and it’s already starting to show greater momentum and also spreading fast geographically, so we’re likely to see prices continuing to fall as interest rates rise.

“Potential buyers might be in the driving seat, but they are also facing worsening mortgage affordability as the recent cash rate increases added around $726 a month to a $1 million home loan. This has clearly weighed on buyer sentiment, adding to further price falls.

“I think a peak-to-trough decline of 10 per cent and 15 per cent in Sydney house prices is possible, particularly in the backdrop of a 40 per cent rise during the pandemic.”

Louis Christopher

Managing director
SQM Research

“There is now a clear trend across all cities of rising listings which is being driven by lower buyer interest and is ultimately symptomatic of the national housing downturn 

“The upcoming spring selling season would be a very tough one for property sellers and their agents. 

“Vendors to consider making further concessions in order to seal a deal. While asking prices have been adjusting downwards since February, there will need to be further compromise if property vendors do want to sell this spring.

Sydney housing market forecasts

is forecasting Sydney's property market to fall as much as -14 per cent this year alone before falling by a further -6 per cent next year, for a total of 20 per cent drop peak-to-trough.

CBA has updated its advice to forecast a reverse of Sydney's property market by -11 per cent in 2022 before dropping -7 per cent in 2023. 

NAB in July revised its forecast, now expecting Sydney property prices to fall by -8.8 per cent across 2022 before a slightly larger fall of -13.4 per cent next year. 

Westpac is anticipating a -2 per cent fall over 2022, a further -8 per cent in 2023, and -1 per cent in 2024.

Sydney auction clearance rates

WeekClearance rateTotal Auctions
Week ending 9 July 2022    54%    435
Week ending 16 July 2022   48% 476
Week ending 23 July 2022   51%500
Week ending 30 July 202250% 482

^Source: Domain - July 2022

Sydney led the recent growth phase of Australia’s property cycle and has also been the first city to enter the current downswing with housing values dropping.

One in four Sydney home sellers are now ditching plans to take their property to auction, as interest rate rises reduce buyer demand and put downward pressure on prices and the auction clearance rate.

Sydney’s withdrawal rate rose from 12.9 per cent over the three months to March, to 19.4 per cent in the June quarter, as seller confidence took a hit, with homeowners concerned about how rising interest rates would affect buyer demand and competition at auction.

About 25 per cent of scheduled auctions were withdrawn between May and July, the highest monthly withdrawn rate since the start of the pandemic, when a ban on public auctions saw more than half of auctions pulled. 

The changing auction activity suggests prices may ease further, particularly if—as economists and investors expect—the RBA keeps raising rates to bring the core inflation rate back to its preferred 2-3 per cent target range.

Sales activity nationally was contracting in the three months to July, by -16.0 per cent when compared to the same period in 2021, heavily impacted by an estimated -39.8 per cent drop in sales across Sydney.

Winter typically sees less auction activity but this year’s fall may be amplified, Corelogic head of research Tim Lawless said, prompting sellers to choose other ways to shift their property.

“Potentially we could see more vendors choosing to sell by private treaty rather than auction as fewer competitive bidders make the auction process less effective at achieving the best possible price,” Lawless said.

Sydney’s Sutherland region recorded the lowest preliminary clearance rate of any of the harbour city’s subregions while the collective area of North Sydney and Hornsby remains the city’s best-performing region and its busiest for auctions.

Sydney residential rental vacancy rate

CityVacancy rateMonthly changeVacanciesNet change
Sydney1.5%-0.1%▼ 11,943▼    474▼

^Source: SQM Research - July 2022

Residential rental listings dropped by -4.5 per cent nationally over July to a record low of 55,000 as more landlords moved their investment properties to short-term leasing, according to SQM Research.

Rental listings in Sydney tumbled -5.7 per cent to 16,142 over the same period, to their lowest level in more than five years. The number of rental listings in Sydney has fallen by -21 per cent in the 12 months.

Overall, the number of new listings coming on to the market is now -13.8 per cent lower than the decade average.

Sydney’s vacancy rate decreased to 1.5 per cent in July, the lowest level on record since August 2017.

The drop was due to the further tightening in Sydney’s inner ring where the vacancy rate declined from 2.9 per cent to 2.2 per cent. The city’s middle ring remains stable at 1.4 per cent and the outer ring rising to 1.6 per cent.

The rise in international arrivals needing inner-city digs has pushed vacancy rates below average levels in the CBD, which has dropped back to 3.4 per cent after soaring to 16.2 per cent at the height of the pandemic.

The number of days it takes for properties to get rented is also contracting, achieving the shortest period in July at 21 days.

The number of renters per available property had also risen by 28 per cent year-on-year in Sydney according to property analysts PropTrack.

Economists expect rental pressures in Sydney to continue due to renters becoming less inclined to move out of rentals due to the difficulties mounting in securing a new property, which in turn will likely lead to the rental costs increasing further.

Importantly, a total of 11,000 Sydney properties are currently listed on Airbnb, which is comparable to the volume of long-term leasing in the city.

Sydney rent prices

TypeRentMonthly % changeAnnual % change

^Source: SQM Research - July 2022

The strong demand for rentals and limited supply is leading to significant increases in advertised rent prices.

Sydney’s median house rents have reached a record $830, and unit rents $538 after their steepest annual increase in 14 years.

More than 90 per cent of suburbs in Sydney are now recording higher house rents than a year ago, while more than 80 per cent have experienced unit rent increases.

Median house rents in four out of 10 Sydney suburbs jumped at least 10 per cent over the last 12 months with the largest increases experienced in the city’s east, northern beaches, upper north shore and central coast. 

About one in eight suburbs had apartment rent rises of at least 10 per cent with Point Piper and Dover Heights having recorded the largest unit rent hikes, up 23.7 per cent and 19.2 per cent, respectively. 

The suburbs of Vaucluse, Balgowlah Heights, Mosman, Bellevue Hill and Rose Bay remain Sydney’s most expensive rental markets, with a median rent of $2000 or more a week.

The suburbs of Roselands, Tempe, Harris Park, Croydon Park and Rosehill are Sydney’s most affordable rental markets, with a median rent of $410 or less a week.

Economists are now forecasting an extra 10 per cent growth in Sydney’s rental market by mid-2023 with demand for rental units expected to rise—due to the reopening of international borders—and investor activity along with it.

“Rental markets are extremely tight, with the number of rental listings available dropping by a third compared to the five-year average, with no signs of a lift in rental supply,” Lawless said.

“On top of already tight rental supply, it’s likely demand will continue to increase as overseas arrival numbers climb.

“Logically, we will probably see a reversal of the pandemic trend towards smaller rental households as tenants look to maximise their occupancy and spread rental costs across a larger household.  

“To this end, rental values are rising fastest in the more affordable unit sector as tenants seek out cheaper rental options.”

NSW building approvals

DwellingApprovedMonthly % change
All dwellings4201-0.8%▼

^Source: Australian Bureau of Statistics - June 2022

Sydney remains in the grip of a historic drop in new housing supply, driven by a collapse in apartment developments, which could exacerbate the city’s shortage and push up prices just as population growth is poised to increase post-pandemic.

While NSW’s population growth slowed to just 22,000 between 2020 and 2021, the resumption of migration and international students now that borders had reopened would likely see that quickly return to 130,000 new migrants per year.

Planning Department records show fewer than 30,000 homes were completed in Greater Sydney in 2020-21, down from more than 42,000 in 2017-18 and 2018-19 and well below the Greater Sydney Commission’s rough target of 36,000 a year.

Apartment completions have nearly halved from their 2017-18 peak of 30,000, but free-standing houses bounced back strongly last financial year and now account for more than 40 per cent of Sydney’s new dwellings.

While some of the slowdown can be attributed to the pandemic, apartment approvals have been decreasing since 2016-17, when they peaked at 38,000.

Home building is expected to continue to support economic growth across 2022 in NSW as stronger-than-expected new dwelling approvals numbers from the glut of Homebuilder purchases still make their way through the system.

Home building lifted slightly by 1.5 per cent in June, mainly due to detached-home building with approvals for private sector houses lifting by 9.2 per cent. 

The cost of building a new house rose by a record $76,000 earlier this year—reflecting a year-on-year rise of 19.8 per cent—as supply chain and labour shortages added to the costs for home builders.

The average surge in cost from a year earlier lifted the average value of new homes approved over the $400,000 mark nationally for the first time.

NSW home loan lending indicators

TypeLending ($bn)Monthly % change
New loan commitments for owner occupier housing$6.475-2.0%▼
New loan commitments for investor housing$3.725-10.5%▼

^Source: Australian Bureau of Statistics - June 2022

Lending for property purchases fell -4.4 per cent over the month of June, according Corelogic.

Each borrower segment saw a decline in value, with investor lending falling by -6.3 per cent, and owner occupier lending down -3.3 per cent. First homebuyer lending declined -10.0 per cent in the month.

Part of the story is rising interest rates. Variable home loan interest rates have been going up across the board in line with the rising cash rate, while some fixed home loan rates have jumped too, as lenders anticipate continued rate rises by the Reserve Bank. 

The central bank recently announced the fourth increase in cash rates in four months from 10 basis points to 1.85 per cent.

The latest Australian Prudential Regulatory Authority data for June showed lending growth moderated to 0.8 per cent to $10.5 billion for owner-occupiers and 0.7 per cent to $4.8 billion for investors in the last month of the financial year.

Over the course of the 2022 financial year, owner-occupied lending increased by $111.5 billion, or 9 per cent, while investment lending was up by $37.7 billion, or 6 per cent. 

NSW average loan size

TypeLending Monthly % change
Average loan sizes for owner-occupier dwellings$743,8702.5%▲

^Source: Australian Bureau of Statistics - September 2022

Growth in owner-occupied mortgages has been decreasing since February, albeit at a slower pace than that seen in June.

Since the RBA started increasing interest rates, growth in loans to owner-occupiers has moderated from the 9 per cent annualised rate seen in April to 8.6 per cent in June.

According to the Reserve Bank of Australia, around 35 per cent of borrowers have fixed loans, compared with around 20 per cent before the outbreak of Covid-19 in late January 2020, 

About a quarter of these loans are expected to end over the next two years, including large numbers with the big four lenders.

NSW interstate migration

StateArivalsDeparturesNet change

^Source: Australian Bureau of Statistics - March 2021

Victoria and New South Wales lost thousands of residents in the first three months of 2021—at the last point that the Australian Bureau of Statistics reported on interstate migration, as they moved to other parts of Australia, with Queensland emerging as the preferred destination.

There were 104,100 people who moved interstate in that period, with Queensland experiencing a net migration increase of 7035, followed by Western Australia on 1639, South Australia on 648, Tasmania on 277 and the ACT on 138.

Victoria suffered a net migration loss of almost 5,000 people between January and March this year as departures outstripped arrivals.

There were 18,907 people who moved to Victoria during the three-month period, but 23,771 residents who left.

NSW experienced the next biggest fall in interstate migration, with 30,684 departures compared to 26,221 arrivals.

While immigration is not the only factor influencing house prices, it adds to the already strong demand for housing.

If Australia's annual immigration intake lifts, beyond federal budget forecasts, to reach about 250,000 people in 2023, that would turn predictions of house price falls into price gains.


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