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Sydney Housing Market Insights: June 2021


The Urban Developer’s Sydney housing market insights for May reveal that Sydney’s residential market has shown no sign of slowing down.

This resource, updated monthly, 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 house and unit price values

TypeMonthQuarterAnnualMedian
All3.0%▲9.3%▲11.2%▲$970,355▲
Houses3.5%▲11.0%▲14.8%▲$1,186,518▲
Units1.8%▲5.3%▲2.8%▲$781,708▲

^Source: Corelogic Hedonic Home Value Index - May

Housing values have surged to record highs in Sydney during May, with more growth expected in coming months as strong demand from buyers outpaces the falling volume of listings.

This follows a peak-to-trough fall in Sydney values of -2.9 per cent between April and September 2020.

From January to April 2021, Sydney dwelling values rose 9.3 per cent with Sydney’s median house price continuing to be the highest among the capital cities—49.8 per cent higher than the national average.

The average house in Sydney is now selling for $1.1 million and units for $800,000. A typical Sydney house is now about $117,000 more expensive than it was at the end of February.

May’s bump in prices was a modest slowdown from March, when values climbed at the fastest pace in 32 years, but the growth still dwarfed price rises across the rest of the country.

Sydney’s price rise was 66 per cent higher than that of Melbourne’s and about 36 per cent higher than the national average.

Sydney’s premium-end housing market rose by 11.4 per cent during the three months ending April, twice as fast as the lower end, which rose by just 5 per cent.



Sydney’s housing market: policy updates

The federal government rolled out its 2021-22 budget in May, a single-year plan centred on aged care, childcare, infrastructure, investment tax breaks and more help for home buyers as it tapers off the record spending from last year’s budget.

Read more: Federal Budget 2021: Property Hits and Misses

The RBA said there has been “increased borrowing by investors”, while reiterating that trends in housing borrowing are being “carefully” monitored, to see that lending standards are maintained.

Read more: RBA Puts Banks on Notice

The housing boom is expected to continue until there is a policy response, likely to be macro-prudential tightening, rather than Reserve Bank rate rises or federal government policy or tax changes, investment bank UBS predicts.

Read more: Policy Needs to Prevent Housing ‘Up-Crash’: UBS



What the experts are saying about Sydney's housing market

Tim Lawless


Tim Lawless
Research Director
Corelogic

“Sydney is well and truly leading the pack still for the fastest growing market in terms of the pace of value growth.

“I think we’ll see demand diverting to a more affordable sector of the marketplace like apartments in Sydney where the pricing gap between houses and apartments is around 50 per cent.

“So even in some of these inner city precincts where we have seen quite extreme rental weakness in the past year, it does look like markets that have been relatively resilient to now are showing some growth.

“I think part of that will be driven by investors who are starting to come back and become more active in the market, but also through demand being diverted into the sector purely through the lower price points that they are offered.”

Dr Nicola Powell


Nicola Powell
Senior Research Analyst
Domain

“The fierce competitive conditions that we saw earlier in the year have eased.

“We’ve seen more new listings come onto the market and I think buyers are becoming challenged by affordability.

“What the new listings will help to do is ease the rapid rate of price gains and alleviate the tough conditions that buyers have been transacting under.

“Units are selling quicker because buyers are being priced out of buying a house.”

Shane Oliver AMP


Shane Oliver
Chief Economist
AMP Capital

“The market is still strong. Key drivers remain the economy and jobs recovery, ultra low rates, incentives, fear-of-missing-out (FOMO) and the return of investors.

“The worsening affordability was becoming an increasing constraint once again.

“Poor affordability will start to bite as the year progresses and the massive pick up in housing construction will dampen price increases, particularly with the borders remaining closed.”

Belinda Allen Senior Economist CommBank


Belinda Allen
Senior Economist
CommBank

“Price rises for units have underperformed price rises for detached houses in the recovery (from the Covid-19-fuelled lows of 2020).

“This has been driven by two main forces; owner-occupiers were the first to return to the housing market post the worst of Covid-19 and the desire for more space post lockdowns fuelled the recovery in detached houses, while the closure of international borders has reduced demand for units.

“Once borders are reopened and student numbers rise we expect that there will be some catch-up for units.”



Sydney housing market forecasts

A recent report from ANZ predicts Sydney house prices will rise to a strong 19 per cent through 2021, before slowing to 6 per cent in 2022, with most segments exhibiting strong price appreciation other than the inner city and high-rise apartment market.

NAB has predicted Sydney’s house prices will rise by 17.5 per cent over 2021, while Commbank is predicting a rise of 16 per cent.

Westpac said record-low interest rates of just 0.1 per cent would see real estate values in Sydney rise by 10 per cent both this year and next.



Sydney auction clearance rates

WeekClearance rateTotal Auctions
Week ending 9 May 202182.6%1157
Week ending 16 May 202181.6%1149
Week ending 23 May 202180%1111
Week ending 31 May 202181%1177

^Source: Corelogic Auction Clearance Rates - May

The resurgence of buyer interest in the Sydney property market has meant that auction clearance rates have consistently been in the high 80 per cent range suggesting there are more buyers than there are sellers leading to higher property prices.

Sydney recorded an 81 per cent preliminary clearance rate on 1177 homes taken to auction in the final week of May.

The end of JobKeeper and other government support packages as well as a rise in the number of homes coming to market are among the factors cooling the market to a degree.

According to Corelogic, the proportion of Sydney sellers bumping up their asking price mid-campaign has dropped to 9.3 per cent in April, down from the peak of 10 per cent in the previous month.



Sydney residential rental vacancy rate

CityApril 2021 vacancy rate Monthly % change
Sydney3.1%▼0.3%▼


Rental stock on market

CityApril 2021 vacanciesMonthly net loss/gain
Sydney23,422▼1835▼


Sydney rent prices

TypeRentMonthly % changeAnnual % change
Houses$663.70▲1.2%▲1.7%▲
Units$453.20▲0.1%▲-5.6%▲

^Source: SQM Research - April

National rent values have risen 5.6 per cent in the year to May, which is the fastest annual increase since February 2009.

House rents in Sydney remained at a record high of $633 per week with weekly unit rents also steady at $453, after three consecutive quarters of falling prices that pushed rents back to 2013 levels.

While unit rents have stabilised in Sydney, they are still $50 a week less than this time last year, having fallen by 9.6 per cent—the steepest annual decline since 2004.

Rents have declined over the year in several regions of Sydney to be down over the year by 5.6 per cent.

The largest rental value declines in the city and in the south Sydney region, where rental values were down 4.1 per cent during the past quarter.

SQM Research managing director Louis Christopher said suburban vacancy rates continued to fall and that was now encompassing Sydney’s inner-suburban regions.

“Rates for Sydney CBDs remain elevated with the loss of international student tenants combined with apartment oversupply,” Christopher said.

“These were just about the only areas recording rises in vacancy rates excluding Sydney’s Liverpool.”



NSW building approvals

^Australian Bureau of Statistics, (Suspension of trend series between May 2020 and Jul 2020 due to Covid-19)

DwellingApprovedMonthly % change
Houses3215▲30.1%▲
Units6858 ▲12.3%▲

^Source: Australian Bureau of Statistics; Reference period April

New South Wales is leading the way for building approvals, hitting highs not seen since the 1980s.

The number of houses approved in April increased 30.1 per cent and apartments were up 12.1 per cent, according to the latest Australian Bureau of Statistics data.

Nationally, private sector houses reached a record high, up 4.6 per cent in April as the HomeBuilder scheme came to an end.

Despite the high level of approvals, the national results were down 8.6 per cent for the month, dampened only by the 18.9 per cent rise in March.

While NSW led the way for building approvals in March, house prices for April had the second biggest upswing in 32 years.



NSW home loan lending indicators

RegionFirst home buyer loan commitmentsFirst home buyer ratio - dwellingsFirst home buyer ratio - housing
NSW3341▲34.2%▼29.7%▼

^Source: Australian Bureau of Statistics - April

Australian Bureau of Statistics data from April showed the average deposit needed to secure a mortgage was $106,743—an increase of 16 per cent since January 2019.

Both the RBA and APRA have emphasised that it is lending standards rather than dwelling price movements that are being monitored.

The RBA also have a financial stability mandate and will be watching the pace of growth in the stock of debt for signs of excess leverage and household debt to income metrics.



NSW interstate migration

RegionDecember (quarter) 2020 arrivalsDecember (quarter) 2020 departuresDecember (quarter) 2020 net
NSW25,356▲30,624▲-5,268▼

^Source: Australian Bureau of Statistics - December 2020 quarter

In the December 2020 quarter, 104,800 people moved interstate. This was 28,500 (37 per cent) more than the number who moved in the previous quarter and 3900 (4 per cent) less than in the December 2019 quarter.

Capital cities had a net loss of 10,600 people from internal migration, compared with a net loss of 3800 for the December 2019 quarter.

There was a net loss of 5300 people from internal migration in the December 2020 quarter across NSW, compared to losses of 4100 people in the previous quarter and 6800 in the December 2019 quarter.

Interstate arrivals increased from 19,000 in the previous quarter to 25,400 in the December 2020 quarter, while departures increased from 23,100 to 30,600.

December 2020 quarter arrivals and departures were at their highest for a quarter since December 2019.

In net terms, New South Wales only gained people from Victoria (+1000) and lost most to Queensland (-4600).


Melbourne (small)


Melbourne Housing Market Insights
Catch up on the highlights across Melbourne’s property market...

Brisbane small image


Brisbane Housing Market Insights
Catch up on the highlights across Brisbane’s property market...

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Article originally posted at: https://www.theurbandeveloper.com/articles/sydney-housing-market-update